BLBG:Pound Surges After Posen Ends Push for More QE as Gilts Tumble
The pound reached the strongest level against the euro in more than 19 months and gilts dropped after minutes of the Bank of England’s last meeting showed policy maker Adam Posen ended his push for further stimulus.
U.K. two-year note yields climbed to a four-week high after central bank officials said inflation may exceed their forecasts. Posen joined the majority of the nine-member Monetary Policy Committee in seeking no change to the 325 billion-pound ($519 billion) asset-purchase target, according to minutes of their April 4-5 meeting. The pound climbed against all 16 of its major peers as a separate report showed jobless claims rose less than economists estimated in March.
“This is a surprise and may reflect a vision of higher inflation and a touch better growth prospects,” Neil Jones, head of European hedge-fund sales at Mizuho Corporate Bank Ltd. in London, said about Posen’s change of vote. “I’m looking for the pound to trade at 80 pence per euro. Pound-dollar will break through the highs of the year soon.”
The pound appreciated 0.7 percent to 81.85 pence per euro at 10:37 a.m. London time. It reached 81.85, the strongest level since Aug. 31 2010. Sterling climbed 0.4 percent to $1.5980. It traded at its 2012 high of $1.6063 on April 2.
The yield on the 10-year gilt climbed four basis points to 2.14 percent, after rising to as much as 2.17 percent. That’s the most since April 5. The two-year note yield advanced three basis points to 0.46 percent, after reaching 0.49 percent, the highest since March 21.
Posen voted in the MPC’s March meeting to increase the central bank’s bond-purchase program by 25 billion pounds to 350 billion pounds. The pound weakened 0.2 percent against the euro on Feb. 9 when the policy makers last announced an increase of asset purchases.
U.K. jobless claims rose by 3,600 from February to 1.61 million, the Office for National Statistics said today in London. The median forecast of 29 economists in a Bloomberg News survey was for a gain of 6,000. Unemployment as measured by International Labour Organization methods dropped to 8.3 percent in the quarter through February from 8.4 percent.
To contact the reporter on this story: Lucy Meakin in London at lmeakin1@bloomberg.net.
To contact the editors responsible for this story: Daniel Tilles at dtilles@bloomberg.net. GUKGNEWS US
