BLBG:Pound Gains Most in Week Versus Euro After PMI Data
The pound strengthened the most in more than a week against the euro after reports showed U.K. construction output slowed less than economists forecast in April and mortgage approvals unexpectedly rose in March.
Sterling fell from within one cent of an eight-month high against the dollar. The yield on German two-, five-, 10-, and 30-year bonds fell to record lows amid deepening concern over the euro-region debt crisis. Gilts advanced a third day.
“We’ve reached a new low in euro-sterling,” said Steven Saywell, head of foreign-exchange strategy for Europe at BNP Paribas SA in London. “The pound is being driven by external factors as well as slightly better data today. We are starting to see sterling outperformance as a theme in the market.”
The pound appreciated 0.5 percent to 81.24 pence per euro at 10:53 a.m. London time, after reaching 81.13 pence, the strongest since June 2010. Sterling was 0.2 percent weaker at $1.6182 after climbing to $1.6302 on April 30, the highest level since Aug. 31.
The U.K currency may strengthen to $1.75 in the second half of 2012, according to Saywell. “That’s a very bullish view, based largely on the dollar remaining weak driven by a very easy U.S. policy, and the market pricing in some policy normalization by the Bank of England,” he said.
BNP is targeting sterling to appreciate to 80 pence per euro over the same period, he said.
Home Loans
A gauge of building activity based on a survey of purchasing managers dropped to 55.8 from 56.7 in March, Markit Economics and the Chartered Institute of Purchasing and Supply said in a report in London. Economists surveyed by Bloomberg News predicted a decline to 54. A reading above 50 indicates expansion.
Lenders granted 49,860 loans to buy homes, compared with 49,029 in February, the Bank of England said today in London. Economists forecast 48,000, based on the median of 21 estimates in Bloomberg survey.
The U.K. economy unexpectedly shrank in the first three months of the year, according to data published April 25, pushing the nation into its first double-dip recession since the 1970s. Gross domestic product fell 0.2 percent from the fourth quarter of 2011, when it declined 0.3 percent, the Office for National Statistics said.
BOE Decision
Bank of England officials will consider whether to extend their asset-purchase program when they meet on May 9-10. The Monetary Policy Committee backed finishing the current 325 billion-pound round of quantitative-easing when it last met on April 4-5.
Sterling has appreciated 3 percent in the past three months, the best performer of the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar and the euro climbed 0.3 percent.
The 10-year gilt yield fell three basis points to 2.07 percent. The 4 percent bond due March 2022 rose 0.325, or 3.25 pounds per 1,000-pound face amount, to 117.16.
Gilts have handed investors a loss of 1.2 percent this year, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. U.S. Treasuries were little changed and German bunds gained 1.4 percent, the indexes show.
Benchmark gilt futures contracts expiring in June may test their record-high should they remain above a level of so-called support, according to UBS AG, citing trading patterns.
“Gilts are bullish while they trade above the 115.08 low,” Richard Adcock, head of fixed-income technical strategy at UBS in London, wrote today in a note to clients. That represents the April 25 intraday low and is a strong recovery level, Adcock wrote.
A break beyond 116.24 will pave the way to the 116.74 April 10 high, he said. The June contract last traded as high as 116.24 on April 27, according to data compiled by Bloomberg.
The June contract rose 0.4 percent to 116.27 today.
To contact the reporter on this story: Keith Jenkins in London at kjenkins3@bloomberg.net
To contact the editors responsible for this story: Daniel Tilles at dtilles@bloomberg.net
