BLBG:Pound Jumps as Minutes Show Policy Makers Voted Against More QE
The pound rallied against the dollar and the euro, reversing earlier declines, after minutes of the Bank of England’s latest meeting showed policy makers voted unanimously against expanding their stimulus program.
Sterling strengthened versus all of its 16 major peers. At Mark Carney’s first meeting, the Monetary Policy Committee voted 9-0 to keep the target of its quantitative-easing program at 375 billion pounds ($570 billion), the minutes showed. After the meeting they also released a statement saying increases in market rates weren’t warranted. A separate report showed U.K. unemployment claims fell at their fastest pace in three years in June. Gilts declined.
“It does seem certain that Carney is viewing forward guidance as a favored policy tool over quantitative easing, at least for the present time,” said Jane Foley, senior currency strategist at Rabobank International in London. “In the medium term, it’s still going to be difficult for sterling to pick up the pace.”
The pound rose 0.1 percent to $1.5177 at 10:14 a.m. London time after falling to as low as $1.5079 earlier today. It appreciated 0.3 percent to 86.56 pence per euro after touching 87.11 pence, the weakest level since March 13.
The benchmark 10-year yield jumped six basis points, or 0.06 percentage point, to 2.32 percent, after falling to 2.26 percent yesterday, the lowest since June 20. The price of the 1.75 percent security maturing in September 2022 dropped 0.5, or 5 pounds per 1,000-pound face amount, to 95.295. Two-year gilt yields rose two basis points to 0.33 percent.
Unemployment Benefits
The Bank of England kept its main interest rate at a record-low 0.5 percent on July 4 and signaled it would keep borrowing costs low for longer than investors had expected. Policy maker Paul Fisher said yesterday the unwinding of stimulus in the U.K. may be “years in the future.”
Jobless claims fell 21,200 from May to 1.48 million, the biggest drop since June 2010, the Office for National Statistics in London said today. Economists forecast a decline of 8,000 based on the median of 23 estimates in a Bloomberg survey. Unemployment as measured by International Labour Organisation standards fell 57,000 to 2.51 million in the three months through May. The rate was unchanged at 7.8 percent.
The pound has weakened 1 percent in the past month, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies. The dollar rose 2.8 percent and the euro gained 1 percent.
Gilts handed investors a loss of 2.2 percent this year through yesterday, according to Bloomberg World Bond Indexes. German bonds declined 0.7 percent and Treasuries fell 2.5 percent, the indexes show.
To contact the reporters on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net; Eshe Nelson in London at enelson32@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
