BS: Pound Approaches Five-Year High as Speculative Bets Increase
The pound was 0.2 percent from the highest level in more than five years against the dollar as data showed speculators increased their bets on its appreciation to the most since 2007.
Sterling approached the strongest level since October 2012 versus the euro before a report this week that analysts said will confirm the U.K. grew 0.8 percent in the first quarter. An improving economy prompted Bank of England Governor Mark Carney to say on June 12 an interest-rate increase may happen sooner than markets anticipated, a message reiterated in minutes of this month’s Monetary Policy Committee meeting released last week. U.K. government bonds rose.
“Momentum is strongly in favor of further pound gains,” said Lee Hardman, a foreign-exchange strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. “The Bank of England looks increasingly hawkish on a relative basis. That’s a key driver of the pound’s strength.”
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The U.K. currency was little changed at $1.7020 at 10:09 a.m. London time after appreciating to $1.7063 last week, the most since October 2008. Sterling strengthened 0.2 percent to 79.80 pence per euro after reaching 79.59 on June 16, the strongest level since Oct. 1, 2012.
Bets by hedge funds and other large speculators on an advance in the pound exceeded those wagering on a decline by 52,596 contracts on June 17, the most since December 2007, data from the Commodity Futures Trading Commission in Washington show.
Rates Bets
The pound rose 1.6 percent versus the U.S. currency this month, the best performer after the New Zealand dollar among 16 major peers tracked by Bloomberg, as the prospect of higher borrowing costs boosted its allure.
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Investors are betting the Bank of England will raise its benchmark interest rate from 0.5 percent -- its record-low level since 2009 -- by February, Sonia contracts show. That compares with May before Carney’s June 12 speech.
Benchmark 10-year gilt yields fell one basis point, or 0.01 percentage point, to 2.75 percent after rising to 2.79 percent on June 13, the highest level since March 11. The 2.25 percent security maturing September 2023 climbed 0.05, or 50 pence per 1,000-pound face amount, to 95.925.
Gilts earned 2.8 percent this year, Bloomberg World Bond Indexes show. That compares with a 4.2 percent return for German bunds and 2.8 percent gain for Treasuries.
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To contact the reporter on this story: Neal Armstrong in London at narmstrong8@bloomberg.net
To contact the editors responsible for this story: Paul Dobson at pdobson2@bloomberg.net Mark McCord
