BLBG:Pound Set for Biggest Weekly Gain in 15 Months
The pound was poised for its biggest weekly gain in 15 months against the euro amid speculation the Bank of England will refrain from extending its stimulus program, in contrast to its European counterpart.
Sterling was set for its first weekly advance in four versus the dollar after future Bank of England Governor Mark Carney said yesterday current monetary policy may be enough to help the economy. European Central Bank President Mario Draghi said yesterday that monetary policy in the 17-nation currency bloc could “remain accommodative.” Gilts underperformed German bunds this week by the most since September.
“We might see a stronger sterling against the euro,” said Eimear Daly, a currency-market analyst at Monex Europe Ltd. in London. “We’ve seen a very dramatic move since the start of the year. The market had priced in aggressive easing from Carney and they were probably disappointed from what they saw yesterday. The move was compounded by what we saw from Draghi.”
The pound was little changed at 85.26 pence per euro at 9:50 a.m. London time, poised for a 1.9 percent gain over the week, the most since November 2011. Sterling rose 0.2 percent to $1.5741, up 0.3 percent since Feb. 1.
Bank of England policy makers yesterday left the benchmark interest rate at a record-low 0.5 percent and held the asset- purchase target at 375 billion pounds, as predicted by all economists surveyed by Bloomberg News.
Yield Spread
The 10-year gilt yield fell one basis point, or 0.01 percent, to 2.09 percent after rising to 2.17 percent on Feb. 4, the highest since April 20. The 1.75 percent bond due September 2022 rose 0.1, or 1 pound per 1,000-pound face amount, to 97.04.
The yield difference, or spread, with 10-year bunds has widened eight basis points this week to 50 basis points. That’s the biggest increase since the five-day period ending Sept. 14. The spread was at 10 basis points on Aug. 6.
The U.K. is scheduled to sell 2.5 billion pounds of 28-, 91- and 182-day securities today.
The pound has dropped 3.2 percent this year, the second- worst performer after the yen among 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro rose 2.3 percent and the dollar gained 0.4 percent.
Gilts handed investors a loss of 2 percent this year through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bunds dropped 1.3 percent and Treasuries fell 0.8 percent.
To contact the reporters on this story: Emma Charlton in London at echarlton1@bloomberg.net; David Goodman in London at dgoodman28@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
