BLBG:Pound Extends Third Weekly Gain as U.K.’s Budget Deficit Narrows
The pound extended a third weekly advance versus the dollar after a government report showed the U.K.’s budget deficit narrowed in August from a year earlier.
Sterling approached the strongest level in eight months against the U.S. currency after the Federal Reserve this week unexpectedly refrained from slowing the pace of bond buying under its quantitative-easing program. U.K. government bonds were little changed, with 10-year gilts headed for a second weekly gain.
“We can extend higher in sterling in this broad risk-positive environment,” said Ian Stannard, head of European currency strategy at Morgan Stanley in London. “However, I would be a bit cautious in the near-term as the move has gone quite a long way. It could be due for a bit of a correction.”
The pound rose 0.1 percent to $1.6054 at 9:46 a.m. London time after climbing to $1.6163 on Sept. 18, the highest level since Jan. 11. It has gained 1.1 percent this week. The U.K. currency appreciated 0.1 percent to 84.29 pence per euro after reaching 83.53 pence on Sept. 18, the strongest since Jan. 17.
Sterling has risen 5.7 percent in the past six months, the best performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro gained 3.9 percent and the dollar weakened 1.2 percent.
The U.K.’s net borrowing excluding temporary support for banks was 13.2 billion pounds last month compared with 14.4 billion pounds a year earlier, the Office for National Statistics said today. The median estimate of 19 analysts in a Bloomberg News survey was for a deficit of 13.3 billion pounds.
The benchmark 10-year gilt yield was at 2.90 percent, having fallen one basis point, or 0.01 percentage point, this week. The price of the 2.25 percent bond maturing in September 2023 was 94.39.
U.K. government bonds lost 4.3 percent this year through yesterday, according to Bloomberg World Bond Indexes. German securities dropped 2.3 percent and Treasuries fell 3 percent.
To contact the reporter on this story: David Goodman in London at dgoodman28@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
