BLBG:Pound Advances for Fifth Day Versus Euro Before Services Report
The pound strengthened for a fifth day against the euro before an industry report that economists said will show U.K. service output expanded in October.
Sterling climbed to a two-week high versus the common currency after an independent economic institute raised its forecasts for U.K. economic growth this year and next. U.K. government bonds declined as the U.K. Debt Management Office prepared to sell 1.25 billion pounds ($2 billion) of inflation-linked securities due in 2052.
“The service data today is the focus,” said Jeremy Stretch, head of currency strategy at Canadian Imperial Bank of Commerce in London. “The fact that we’ve had such strong numbers is consistent with the good performance of the economy. The risks are that we do see a bit of a drop off in the data and that provides a slightly softer backdrop for sterling.”
The pound rose 0.2 percent to 84.46 pence per euro at 8:59 a.m. London time, after appreciating to 84.39 pence, the strongest level since Oct. 16. The U.K. currency advanced 0.1 percent to $1.5979.
An index of services, based on a survey of purchasing managers, was at 60 last month from 60.3 in September, according to the median forecast of 30 economists in a Bloomberg News survey. The gauge has been above the 50 level that divides expansion from contraction since January.
Construction Data
The pound rose against the dollar yesterday after Markit Economics said its index of British construction activity rose to a six-year high. The economy will expand 1.4 percent this year and 2 percent in 2014, a 0.2 percentage-point increase for each year, the London-based National Institute of Economic and Social Research said today
The U.K. currency may weaken below $1.59 today if the services data falls short of forecasts, Stretch said.
The pound gained 3.7 percent in the past six months, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies. The dollar rose 0.9 percent and the euro climbed 4 percent.
The yield on the benchmark 10-year gilt rose three basis points, or 0.03 percentage point, to 2.65 percent after falling to 2.52 percent on Oct. 31, the lowest since Aug. 13. The 2.25 percent bond due September 2023 fell 0.22, or 2.20 pounds per 1,000-pound face amount, to 96.55.
The real yield on inflation-linked bonds maturing in March 2052 climbed two basis points to 0.04 percent.
U.K. gilts lost 2.3 percent this year through yesterday, according to Bloomberg World Bond Indexes. Treasuries slid 2.1 percent and German bonds declined 0.9 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
