BLBG:Pound Approaches One-Month High Versus Dollar Before GDP Report
The pound approached the strongest in a month versus the dollar before a government report that economists said will confirm U.K. gross domestic product grew at the fastest pace since 2010 last quarter.
Britain’s currency climbed versus 12 of its 16 major peers amid optimism the data will add to evidence the recovery is gaining momentum. U.K. government bond yields fell to the lowest in a week after Bank of England policy maker Ian McCafferty said the central bank won’t rush to raise interest rates. There’s spare capacity in the job market and record-low borrowing costs may be needed even after unemployment falls to the threshold set under forward guidance, Governor Mark Carney said yesterday.
“We’ll get the breakdown of where the growth is coming from today and that may give a positive sign that the recovery is broadening and strengthening,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “The bigger picture is that the U.K. economy is performing very robustly and that’s supportive for the pound.”
Sterling rose 0.1 percent to $1.6235 at 9:08 a.m. London time after advancing to $1.6240 on Nov. 25, the highest level since Oct. 25. The U.K. currency was little changed at 83.73 pence per euro.
The pound has gained 6.9 percent in the past six months, the best performer of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro appreciated 4.3 percent, while the dollar fell 1.4 percent.
Quicker Growth
U.K. gross domestic product increased 0.8 percent in the third quarter after growing 0.7 percent in the period through June, according to the median estimate of economists in a Bloomberg News survey. That would confirm a report released on Oct. 25.
There is “clearly sensitivity with interest rates when you start on a very low level,” McCafferty told the Brentwood Gazette. “Even a small increase can make a big change and so we’re very sensitive to that fact.”
The benchmark 10-year gilt yield was little changed at 2.74 percent after falling to 2.72 percent, the lowest level since Nov. 20. The price of the 2.25 percent bond maturing in September 2023 was 95.825.
Gilts lost 2.9 percent this year through yesterday, according to Bloomberg World Bond Indexes. German securities fell 1 percent and U.S. Treasuries slid 2.2 percent.
To contact the reporters on this story: Emma Charlton in London at echarlton1@bloomberg.net; Anchalee Worrachate in London at aworrachate@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
