BLBG:Pound Strengthens Against Euro After U.K. Construction Expands
The pound strengthened for the first time in five days against the euro after an industry report showed U.K. construction expanded in June, adding to signs the U.K. economy is gaining momentum.
Britain’s currency rose from the lowest level in more than a month versus the euro after data yesterday showed manufacturing output grew last month. Mark Carney began as governor of the Bank of England yesterday and will lead his first policy meeting this week. The U.K. Debt Management Office is scheduled to auction 3.5 billion pounds ($5.32 billion) of 10-year gilts today.
“The data seems to be providing a little bit of a shield to a dip lower for now,” said Lee McDarby, head of dealing on the corporate and institutional treasury desk at Investec Bank Plc in London. “There’s some nervousness before Carney’s first policy meeting this week so you won’t see any big shifts in the pound before that.”
The pound advanced 0.2 percent to 85.68 pence per euro as of 10:03 a.m. London time after weakening 1.2 percent in the previous four days. The U.K. currency was little changed at $1.5201 after falling to $1.5166 on June 28, the lowest level since May 31.
An index of construction rose to 51 in June from 50.8 the previous month, Markit and the Chartered Institute of Purchasing and Supply said in London. Economists predicted 51.2, according to a Bloomberg survey. A reading above 50 signals expansion.
Sterling has strengthened 4.1 percent in the past three months, according to Bloomberg Correlation-Weighted Indexes that track 10 developed-market currencies. The euro gained 5.2 percent and the dollar climbed 3.4 percent.
Government Bonds
The benchmark 10-year gilt yield was little changed at 2.41 percent. The price of the 1.75 percent security maturing in September 2022 was 94.63.
The U.K. last sold 10-year securities on June 11 at an average yield of 2.365 percent. That was the highest at auction since December 2011 and compares with a record-low 1.719 percent set at a sale on July 12, 2012.
Gilts handed investors a loss of 3.2 percent this year through yesterday, according to Bloomberg World Bond Indexes. German bonds dropped 1.6 percent and Treasuries declined 2.8 percent, the indexes show.
To contact the reporter on this story: Emma Charlton in London at echarlton1@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
