BLBG:Pound Rises to Four-Week High Versus Dollar Before BOE Decision
The pound strengthened to a four-week high against the dollar amid speculation the Bank of England will refrain from boosting stimulus measures today at Governor Mervyn King’s final meeting.
The U.K. currency advanced versus all except two of its 16 major counterparts as a Halifax report showed British house prices rose for a fourth month in May, adding to signs the economy is recovering. Economists say a monthly U.S. job report tomorrow will show employers hired as many workers last month as in April. U.K. government bonds were little changed with 10-year yields about five basis points from a three-month high.
“Cable largely is taking its direction from the dollar rather than sterling,” said Adam Cole, head of G-10 currency strategy at Royal Bank of Canada in London, referring to the pound-dollar exchange rate. “We’re waiting for central-bank announcements today and probably more importantly the payrolls number tomorrow. There’s a pretty solid expectation of no change in either of the BOE policy parameters.”
The pound climbed 0.3 percent to $1.5452 at 9:54 a.m. London time after rising to $1.5453, the highest level since May 10. The U.K. currency was little changed at 84.96 pence per euro after appreciating to 84.92 pence, the strongest since May 21.
Sterling has gained 4.4 percent in the past three months, the best performer among 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar gained 1.2 percent and the euro strengthened 2.6 percent.
Bond Purchases
Bank of England policy makers will maintain their target for bond purchases at 375 billion pounds when they announce their decision at 12 p.m. in London, according to all except one of 43 estimates in a Bloomberg survey.
The Monetary Policy Committee will also keep the U.K.’s main interest rate at a record-low 0.5 percent, according to all 53 economists in a separate Bloomberg survey. King’s successor Mark Carney takes over on July 1.
U.K. home values rose 0.4 percent in May from the previous month to an average 166,898 pounds, the highest since August 2010, Halifax, the mortgage unit of Lloyds Banking Group Plc, said in a statement.
American employers boosted payrolls by 165,000 last month, according to the median forecast from 88 economists surveyed by Bloomberg before tomorrow’s Labor Department report.
The 10-year gilt yield was at 2.01 percent after climbing to 2.06 percent on June 3, the highest level since March 8. The price of the 1.75 percent bond due in September 2022 was 97.855.
Gilts handed investors a loss of 1.1 percent this year through yesterday, according to the Bloomberg U.K. Sovereign Bond Index. (BRIT) German bonds dropped 0.7 percent and U.S. Treasuries declined 0.8 percent, separate indexes show.
To contact the reporter on this story: Lucy Meakin in London at lmeakin1@bloomberg.net.
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net.
