BLBG:Pound Rises Second Day Versus Dollar Before BOE Policy Decision
The pound advanced for a second day versus the dollar amid speculation the Bank of England will refrain from increasing monetary stimulus that tends to debase a currency at the end of a two-day policy meeting.
Sterling approached a three-month high versus the U.S. currency before a report that economists said will show U.K. industrial production grew at a slower pace in March. The central bank will maintain the target for its asset-purchase program, known as quantitative easing, at 375 billion pounds ($583 billion), according to all but one of 44 analysts in a Bloomberg News survey. Government bonds were little changed.
“There’s a natural drift higher taking place at the moment” in sterling, said Simon Derrick, London-based chief currency strategist at Bank of New York Mellon Corp. “Sterling to a large degree is on hold. Underneath it all, there are reasons to be cautious on the U.K. economy.”
The pound gained 0.1 percent to $1.5554 as of 8:57 a.m. London time. It strengthened 0.3 percent yesterday and reached $1.5606 on May 1, the highest since Feb 13. Sterling was little changed at 84.65 pence per euro.
The Office for National Statistics will say total industrial output increased 0.2 percent from February, when it rose 1 percent, according to the median estimate of 31 economists surveyed by Bloomberg.
Rate Decision
Bank of England policy makers will keep the main interest rate at a record-low 0.5 percent, according to a separate Bloomberg survey. The decision is due at noon in London.
“We’ll probably get confirmation, almost certainly, that policy is remaining as is for the time being,” John Wraith, a fixed-income strategist at Bank of America Merrill Lynch in London, said on Bloomberg Television’s “Countdown” with Mark Barton and Anna Edwards. “Quantitative easing is now on hold for some considerable time.”
The pound has strengthened 1.7 percent in the past month, the best performer of 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar was little changed, while the euro gained 0.8 percent.
Ten-year gilt yields were at 1.77 percent after rising to 1.81 percent on May 7, the highest since March 26. The 1.75 percent securities due September 2022 traded at 99.815.
Gilts returned 1.1 percent this year through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bonds gained 0.7 percent and Treasuries earned 0.4 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
