BLBG:Pound Rises for Second Day Versus Dollar as Easing Bets Decline
The pound strengthened for a second day against the dollar amid speculation the Bank of England will refrain from adding monetary stimulus to the economy when it meets next week.
U.K. 10-year bonds dropped for a second day as stock gains damped demand for safer assets. The pound advanced even after an industry report showed consumer sentiment declined in September. The central bank will announce on Nov. 8 whether to increase its target for asset purchases, or quantitative easing, from 375 billion pounds ($605 billion) after data last week showed gross domestic product expanded 1 percent last quarter as the economy emerged from a recession.
“There are expectations for monetary policy to be less loose and that does support sterling,” said Raghav Subbarao, a foreign-exchange strategist at Barclays Plc in London. “The U.K. GDP last week indicated the underlying trend is much stronger.”
The pound rose 0.3 percent to $1.6116 at 10:11 a.m. London time after appreciating 0.3 percent yesterday. The U.K. currency was little changed at 80.68 pence per euro after weakening 0.5 percent over the previous three days.
Sterling will strengthen to $1.65 by year-end, Subbarao said, citing Barclays’s forecasts.
The central bank’s Monetary Policy Committee voted 9-0 to keep its bond-purchase target unchanged at its Oct. 3-4 meeting, according to the minutes released on Oct. 17. “Some members felt that there was considerable scope for asset purchases to provide further stimulus,” the minutes showed.
Consumer Confidence
An index of consumer confidence declined to minus 30 from minus 28 in September, London-based GfK NOP Ltd. said in an e- mailed report. A gauge of how consumers see their personal financial situation over the next year dropped 5 points to minus 13, the lowest in six months.
A survey of purchasing managers will show the manufacturing sector shrank in October when the data is released tomorrow, according to the median forecast of 27 economists in a Bloomberg News survey.
The Swiss National Bank said it increased the allocation of pounds in its foreign-exchange reserves to 7 percent in the third quarter from 3 percent in the previous three months, according to a statement today.
Sterling gained 1.6 percent this year according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-market currencies. The euro dropped 2.1 percent and the dollar declined 2.4 percent.
The U.K. 10-year yield rose four basis points, or 0.04 percentage point, to 1.87 percent. The 1.75 percent bond maturing in September 2022 fell 0.34, or 3.40 pounds per 1,000 pounds to 98.97.
Gilts returned 2.8 percent this year through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bonds gained 3.2 percent and U.S. Treasuries earned 1.9 percent.
To contact the reporter on this story: Neal Armstrong in London at narmstrong8@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
