BLBG:U.K. Pound Strengthens From Weakest in Three Years Versus Dollar
The pound rose from a three-year low versus the dollar amid speculation a selloff in the past week was excessive before inflation data due next week.
Sterling dropped yesterday against the U.S. currency after a report showed U.K. manufacturing unexpectedly shrank in May, casting doubt on the strength of the recovery. Consumer- and producer-price inflation reports are scheduled for July 16, and minutes of this month’s Bank of England’s monetary policy meeting will be released a day later. U.K. government bonds were little changed before the Debt Management Office sells 2.25 billion pounds ($3.35 billion) of 2044 gilts tomorrow.
“The pound seems to be finding some support against the dollar after the recent decline,” said Roberto Mialich, a currency strategist at UniCredit SpA (UCG) in Milan. “But that doesn’t change a longer-term outlook that sterling should remain under pressure because of the Bank of England’s policy.”
The pound rose 0.2 percent to $1.4896 at 10:18 a.m. London time after dropping to $1.4814 yesterday, the lowest since June 23, 2010. The U.K. currency slipped 0.1 percent to 86.09 pence per euro after touching 86.69 pence yesterday, the weakest level since March 14.
The Bank of England, led by Governor Mark Carney, signaled last week it would keep U.K. interest rates at a record low for longer than investors anticipated. BOE policy maker David Miles speaks in London tomorrow on household-debt repayment.
The pound slumped 2 percent in the past week, according to Bloomberg Correlation-Weighted Indexes that track 10 developed-nation currencies. The dollar strengthened 0.8 percent, while the euro slid 0.8 percent.
The 10-year gilt yielded 2.43 percent. The price of the 1.75 percent bond due in September 2022 was 94.465. Thirty-year yields were at 3.61 percent.
The Debt Management Office last sold 30-year gilts on May 16 at an average yield of 3.293 percent.
U.K. government bonds handed investors a loss of 3.5 percent this year through yesterday, according to Bloomberg World Bond Indexes. German bonds dropped 1.2 percent and Treasuries declined 3.4 percent, the indexes show.
To contact the reporters on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net; Emma Charlton in London at echarlton1@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
