BLBG:Pound Rises 2nd Day Versus Dollar as U.K. Home Prices Increase
The pound strengthened for a second day against the dollar as an industry report showed U.K. house prices jumped the most in 18 months in May.
Sterling climbed versus the U.S. currency after falling yesterday to the lowest level in more than two months. Home prices rose 1.1 percent from a year earlier, the most since November 2011, the Nationwide Building Society said in an e-mailed statement. They climbed 0.4 percent from April to an average 167,912 pounds ($254,400). Gilts advanced, trimming their worst monthly loss since December 2009.
“The recovery in the U.K. economy is patchy, but it’s gradually going in the right direction,” said Neil Jones, the London-based head of European hedge-fund sales at Mizuho Corporate Bank Ltd. “I see the recovery in the housing market as a manifestation of that. The demand for sterling should be well underpinned.”
The pound advanced 0.1 percent to $1.5149 at 11:33 a.m. London time after falling to $1.5009 yesterday, the least since March 14. The U.K. currency was little changed at 85.67 pence per euro.
Sterling has weakened 2.8 percent this year, the third-worst performer among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes after the yen and Australian dollar. The U.S. currency gained 5.1 percent and the euro strengthened 3.2 percent.
Nationwide said today the housing market is “gradually” gaining momentum. Bank of England Governor Mervyn King said this month that an economic recovery is in sight as officials raised their forecast for growth.
Cheaper Credit
The central bank has extended its Funding for Lending Scheme to give lenders access to cheaper credit and kept interest rates at a record low to support the recovery.
Data tomorrow will show mortgage approvals increased to 54,600 in April from 53,504 in March, according to a Bloomberg News survey of economists. The Bank of England will publish the data at 9:30 a.m. in London.
The pound may resume its decline against the dollar as policy makers are likely to keep their “dovish” tone ahead of the arrival of new governor Mark Carney in July, Morgan Stanley strategists led by Hans Redeker in London wrote in a client note today.
“The sterling/dollar rebound has triggered the take-profit stop on our short position and we now expect a further recovery in the near term,” the report said. “We view this rebound as corrective and we look for renewed selling opportunity in the $1.5820 area.”
Analysts Forecasts
Sterling will fall to $1.51 by the end of June and decline to $1.49 by the end of 2013, according to the median of analysts’ forecasts compiled by Bloomberg News.
The 10-year gilt yield dropped two basis points, or 0.02 percentage point, to 1.98 percent after rising above 2 percent yesterday for the first time since March. The 1.75 percent security due in September 2022 rose 0.16, or 1.60 pounds per 1,000-pound face amount, to 98.05. The rate on two-year gilts was little changed at 0.37 percent.
U.K. gilts lost 2.4 percent this month through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bonds dropped 1.6 percent and U.S. Treasuries declined 1.8 percent.
Securities in the Bank of America Merrill Lynch Global Broad Market Index have fallen 1.5 percent in May, poised for the steepest loss since April 2004.
To contact the reporter on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
