BLBG:Pound Declines Versus Dollar as Manufacturing Contracts in March
The pound fell for the first time in four days against the dollar after a report showed U.K. manufacturing output contracted more than economists forecast in March.
Gilts were little changed, holding three weeks of gains, as Cypriot government officials said they would seek easier bailout terms in talks with the European Union and International Monetary Fund today. Bank of England policy makers are due to meet this week. Minutes of their last two meetings showed three members of the Monetary Policy Committee voted to increase their asset-purchase target, known as quantitative easing, from 375 billion pounds ($569 billion).
“The manufacturing data has been poor, but expectations were poor as well,” said Peter Kinsella, a currency strategist at Commerzbank AG in London. “The pound has rallied a little bit recently. This is the third time we’ve struggled to break above $1.5250 in a meaningful way. Selling rallies in pound- dollar is a good idea.”
The pound slid 0.3 percent to $1.5183 as of 12:34 p.m. London time after climbing to $1.5259, the highest since March 25. Sterling weakened 0.2 percent to 84.50 pence per euro.
A gauge of U.K. manufacturing, based on a survey of purchasing managers, was 48.3 last month from 47.9 in February, Markit Economics and the Chartered Institute of Purchasing and Supply said today. That compares with the 48.7 median estimate of 28 analysts in a Bloomberg News survey. A reading below 50 indicates contraction.
Mortgage approvals fell more than economists forecast in February. Lenders granted 51,653 home loans, the least since September, compared with a revised 54,187 in January, the Bank of England said in London.
Gilt Yields
The 10-year gilt yield was at 1.77 percent after dropping 29 basis points in the three weeks from March 8 through March 28. The 1.75 percent bond due in September 2022 traded at 99.865.
“People are less than optimistic on the U.K. at the moment,” said Simon Peck, a fixed-income strategist at Royal Bank of Scotland Group Plc in London. “There’s also a policy meeting this week so the time is ripe for more speculation on potential further quantitative easing. What’s going on in Cyprus is also helping safe-haven flows and the bid for gilts.”
The pound has lost 4.8 percent this year, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies. The euro fell 0.3 percent and the dollar gained 2.7 percent.
Gilts have returned 0.7 percent this year, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bunds gained 0.4 percent and Treasuries were little changed.
To contact the reporter on this story: David Goodman in London at dgoodman28@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
