BLBG:Pound Climbs From 4-Month Low Versus Euro as Mortgage Deals Rise
The pound strengthened from a four- month low against the euro after an industry report showed U.K. mortgage approvals rose last month to the highest since April.
Britain’s currency advanced after a technical indicator used by traders to predict price changes signaled its recent decline was excessive. Sterling was also boosted as economists said a report this week will show the U.K. exited a recession in the third quarter. Gilts advanced as the Debt Management Office was said to begin selling a bond maturing in January 2044 via banks.
“Some of the data has not been too bad and there is potential for sterling outperformance,” said Gavin Friend, a foreign-exchange strategist at National Australia Bank Ltd. in London. “We are all focused on the GDP data. If the number is good we will get a good bounce in the pound and we would use that as a selling opportunity.”
The pound gained 0.3 percent to 81.34 pence per euro at 1:05 p.m. London time after depreciating to 81.65 pence yesterday, the weakest level since June 11. Sterling slid 0.2 percent to $1.5986.
Mortgage approvals rose to 31,175 from 30,683 in August, the British Bankers Association said in a statement today, the highest reading since April, when they climbed 32,070.
Data last week showed retail sales rose more than analysts estimated in September and jobless claims unexpectedly fell. Gross domestic product increased 0.6 percent, according to a Bloomberg News survey of economists before the data on Oct. 25.
Pound Forecast
Investors should sell the pound should it appreciate to $1.63 and when it strengthens to 80.80 pence per euro, Friend said.
Sterling declined 0.6 percent in the past three months, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-market currencies. The euro gained 4 percent and the dollar dropped 3.9 percent.
The 14-day relative strength index for the pound against the euro, which tracks momentum by comparing closing prices with daily trading ranges, was 35, after reaching 29 yesterday. A drop below 30 indicates an asset may be “oversold” and has fallen too quickly.
The benchmark 10-year gilt yield fell three basis points, or 0.03 percentage point, to 1.88 percent. The 1.75 percent security maturing in September 2022 rose 0.23, or 2.30 pounds per 1,000-pound face amount, to 98.86.
The 3.25 percent security on sale today may price eight basis points above the 4.5 percent 2042 bond due in December, according to a person familiar with the matter who asked not to be identified because they’re not authorized to speak about it. The yield on the 2042 debt dropped two basis points to 3.19 percent.
Gilts have handed investors a return of 1.8 percent this year through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bonds gained 2.3 percent, while Treasuries earned 1.5 percent.
To contact the reporter on this story: Emma Charlton in London at echarlton1@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
