BLBG:Pound Approaches 11-Week High Versus Dollar on Construction Data
The pound rose, approaching an 11-week high versus the dollar, as an industry report showed U.K. construction improved more than economists predicted in April, fueling optimism that the recovery will pick up pace.
Sterling gained for a second day against the euro before the European Central Bank announces its interest-rate decision. The U.K. currency has strengthened 3.1 percent in the past month against the dollar after slipping 6.5 percent in the first quarter of 2013. The Bank of England meets next week after data yesterday showed an index of manufacturing shrank in April less than economists predicted, weakening the case for more stimulus. U.K. government bonds fell.
“At the moment, the U.K. economy is surprising more downbeat expectations” and allowing the pound to rally, said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “It’s a corrective rebound phase after a sharp decline in the first quarter.”
The pound rose 0.1 percent to $1.5577 as of 11:15 a.m. London time after climbing to $1.5606 yesterday, the highest since Feb. 13. It advanced for a seventh day against the U.S. currency, the longest run of gains since April 2012. Sterling appreciated 0.3 percent to 84.52 pence per euro after reaching 83.98 pence on April 26, the strongest level since Jan. 24.
An index of building-industry output increased to 49.4 from 47.2 in March, Markit and the Chartered Institute of Purchasing and Supply said today. While that was below the 50 level that indicates contraction, it was more than the median forecast of 48 in a Bloomberg News survey of nine analysts.
The construction gauge hasn’t been at 50 or above since October.
Currency Indexes
The pound has gained 2.6 percent in the past month, the best performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro rose 2.1 percent, while the dollar dropped 0.9 percent.
The ECB will lower its main refinancing rate by 25 basis points to a record-low 0.5 percent today, according to the median forecast of 70 economists surveyed by Bloomberg. The Bank of England’s Monetary Policy Committee next meets on May 8-9.
Governor Mervyn King has wanted to expand the U.K. central bank’s 375 billion-pound asset-purchase target for three consecutive months but has been outvoted by a majority on the nine-member policy committee, minutes of their meetings show.
“The data that we’ve been seeing hasn’t been as bad as expected,” said Jane Foley, senior foreign-exchange strategist at Rabobank International in London. Still “the data has just not been good enough for the market to see good reasons for additional momentum.”
The 10-year gilt yield rose two basis points, or 0.02 percentage point, to 1.67 percent. The 1.75 percent bond maturing in September 2022 fell 0.18, or 1.80 pounds per 1,000- pound face amount, to 100.665.
Gilts have returned 2.1 percent this year through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bonds and U.S. Treasuries gained 1.1 percent.
To contact the reporter on this story: Lukanyo Mnyanda in Edinburgh at lmnyanda@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
