BLBG:Pound Rises for Fourth Day Versus Euro on Housing, Mortgage Data
The pound strengthened for a fourth day against the euro after U.K. reports showed house prices rose the most in six years and mortgage approvals increased, adding to evidence economic growth is gathering momentum.
Sterling climbed to a nine-month high versus the dollar after Bank of England Governor Mark Carney said last week he sees no case for more stimulus that tends to debase a currency. U.K. gilts gained for a sixth day as speculation the Italian coalition led by Prime Minister Enrico Letta is nearing collapse and concern the U.S. government is heading for a partial shutdown underpinned demand for safer assets.
“U.K. data have been better than expected, which makes it more unlikely that the BOE will add to their stimulus,” said Lutz Karpowitz, a senior currency strategist at Commerzbank AG in Frankfurt. “The pound is benefiting against the euro from the Italian government troubles.”
The pound advanced 0.3 percent to 83.54 pence per euro as of 11:10 a.m. London time after appreciating to 83.40 pence, the strongest level since Jan. 17. Sterling climbed 0.1 percent to $1.6154 after rising to $1.6181, the highest since Jan. 3.
Britain’s currency will climb to 83 pence per euro by year-end, Commerzbank’s Karpowitz said.
Futures traders last week reversed bets the pound would weaken against the dollar, figures from Commodity Futures Trading Commission released on Sept. 27 showed.
The difference in the number of wagers by hedge funds and other large speculators on an advance in the pound compared with those on a drop -- so-called net longs -- was 1,174 on Sept. 24, compared with net shorts of 6,310 a week earlier. Futures are agreements to buy or sell assets at a set price and date.
Home Prices
Average home prices in England and Wales rose 0.5 percent in September, the most since May 2007, after rising 0.4 percent in August, property researcher Hometrack said in a statement. Mortgage approvals rose to 62,226, the most since February 2008, compared with a revised 60,914 the previous month, the Bank of England said in a monthly report.
Prime Minister David Cameron brought forward the second phase of his “Help to Buy” program yesterday. The plan, which will provide government-guaranteed mortgages for buyers with a deposit of as little as 5 percent of the value of homes costing as much as 600,000 pounds, will start three months earlier than planned. Chancellor of the Exchequer George Osborne is scheduled to give a speech to the Conservative Party conference in Manchester, England.
Carney Comments
Carney told the Yorkshire Post last week that the central bank would consider expanding its bond purchases, known as quantitative easing, only if the economy faltered.
The pound has risen 6.5 percent in the past six months, the best performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar weakened 0.5 percent, while the euro gained 5.4 percent.
Ten-year gilt yields dropped to the lowest level in a month after Italy’s Letta defied the attempt of former premier Silvio Berlusconi to force new elections. Berlusconi, a partner in the ruling coalition, has pulled his ministers from the Cabinet.
German bonds and Treasuries also rose as U.S. politicians clashed over the budget, threatening a government shutdown.
The yield on the benchmark 10-year gilt dropped two basis points, or 0.02 percentage point, to 2.69 percent after declining to 2.67 percent, the lowest since Aug. 27. The 2.25 percent bond maturing in September 2023 rose 0.15, or 1.50 pounds per 1,000-pound face amount, to 96.17.
The Bank of England said today foreign investors reduced their gilt holdings by 6.04 billion pounds in August, the most since June 2012. That followed a net purchase of 1.27 billion pounds in July.
The London-based central bank plans to buy 640 million pounds of gilts today as it reinvests the proceeds of its asset-purchase plan.
Gilts lost 3.1 percent this year through Sept. 27, according to Bloomberg World Bond Indexes. German bunds dropped 1.5 percent and Treasuries fell 2.4 percent.
To contact the reporter on this story: Emma Charlton in London at echarlton1@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
