BLBG:Pound Climbs to 4-Month High Versus Dollar as U.K. Output Rises
The pound rose to its strongest level in almost four months against the dollar after a report showed U.K. industrial production rebounded in July, adding to signs the recession is easing.
Sterling advanced for a third day as the factory data followed a purchasing managers’ index this week that showed services expanded. Ten-year gilts fell after European Central Bank President Mario Draghi yesterday unveiled a bond-buying program to stem the euro-area sovereign-debt crisis, damping demand for the safest assets.
“We’ve had a really good week of data for sterling with the PMI surveys and industrial production today which indicates the underlying trend is not as bad as previously expected,” said Raghav Subbarao, a foreign-exchange strategist at Barclays Plc in London. “Draghi has helped risk sentiment which has pulled the pound higher.”
Sterling rose 0.1 percent to $1.5944 as of 11:33 a.m. London time, after reaching $1.5986, the strongest level since May 16. The U.K. currency has strengthened 0.5 percent since Aug. 31, a fifth week of gains. The pound slipped 0.4 percent to 79.62 pence per euro, the weakest level since Aug. 6.
The U.K. currency has gained 1.7 percent in the past month, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-market currencies. The dollar fell 0.9 percent and the euro rose 1.7 percent.
Gilts Decline
Ten-year gilts dropped for a third day as industrial production surged in July after manufacturing rebounded from disruption caused by the extra public holiday in June for the Queen’s Jubilee.
Production rose 2.9 percent, the most since February 1987, after falling 2.4 percent in June, the Office for National Statistics said today in London. The median forecast in a Bloomberg News survey was for a gain of 1.5 percent.
Ten-year gilt yields climbed as much as eight basis points to 1.80 percent, the highest since June 29, after Draghi said that asset purchases “will enable us to address severe distortions in government bond markets, which originate from, in particular, unfounded fears on the part of investors of the reversibility of the euro.” German 10-year bunds fell a sixth day, pushing the yield to 1.62 percent, the most since June 29.
Gilts have returned 3.3 percent this year through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bunds gained 2.7 percent and U.S. Treasuries earned 2.1 percent.
To contact the reporter on this story: Neal Armstrong in London at narmstrong8@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
