BLBG:Pound Gains Second Day as Production Rises Before BOE Decision
The pound advanced for a second day versus the dollar as a government report showed U.K. industrial production grew faster than economists predicted in March.
Sterling strengthened against most of it 16 major peers tracked by Bloomberg amid speculation the Bank of England will refrain from increasing asset purchases that tend to debase a currency at their policy meeting today. The central bank will maintain the target for its program, known as quantitative easing, at 375 billion pounds ($584 billion), according to all but one of 44 analysts in a Bloomberg News survey. Government bonds were little changed.
“Industrial production was better than expected and that caused a bit of a bounce higher” in the pound, said Kathleen Brooks, research director in London at Forex.com, a unit of online currency-trading company Gain Capital Holdings Inc. (GCAP) “We are not expecting too much from the Bank of England,” she said.
The pound gained 0.2 percent to $1.5570 as of 11:20 a.m. London time. It strengthened 0.3 percent yesterday and reached $1.5606 on May 1, the highest since Feb 13. Sterling appreciated 0.2 percent to 84.48 pence per euro.
The pound faces “tough resistance” at $1.56, Forex.com’s Brooks said. In technical analysis, resistance refers to an area on a chart where sell orders may be clustered.
Industrial output increased 0.7 percent from February, when it gained 0.9 percent, the Office for National Statistics said in London. The median forecast of 31 economists in a Bloomberg News survey was for a gain of 0.2 percent. Data also showed that manufacturing rose 1.1 percent in March, exceeding the median forecast in a Bloomberg survey for an increase of 0.3 percent.
Rate Decision
Bank of England policy makers will keep the main interest rate at a record-low 0.5 percent, according to a separate Bloomberg survey. The decision is due at noon in London.
“We’ll probably get confirmation, almost certainly, that policy is remaining as is for the time being,” John Wraith, a fixed-income strategist at Bank of America Merrill Lynch in London, said on Bloomberg Television’s “Countdown” with Mark Barton and Anna Edwards. “Quantitative easing is now on hold for some considerable time.”
The pound has strengthened 1.9 percent in the past month, the best performer of 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar was little changed, while the euro gained 0.7 percent.
The 10-year gilt yield was at 1.76 percent after rising to 1.81 percent on May 7, the highest since March 26. The price of the 1.75 percent securities due in September 2022 was at 99.895.
Gilts returned 1.1 percent this year through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bonds gained 0.7 percent and Treasuries earned 0.4 percent.
To contact the reporter on this story: Lukanyo Mnyanda in Edinburgh at lmnyanda@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
