Bloomberg News

Pound Rises as Spending Data Boosts Economic Outlook; Gilts Gain

February 24, 2012

Feb. 24 (Bloomberg) -- The pound rose for a second day versus the dollar after the government’s quarterly economic- growth report showed consumer spending rose more than forecast, boosting speculation the country will avoid a recession.

Sterling rose against all but one of its 16 major counterparts as private consumption and exports both increased in the fourth quarter, mitigating a decline in gross domestic product. The currency still headed for a weekly loss after minutes of this month’s Bank of England meeting released two days ago fueled speculation the central bank will boost bond purchases again this year. Gilts advanced.

“What’s good about the data is the level of private consumption and that tells us consumers are still spending money,” said Peter Kinsella, a senior currency strategist at Commerzbank AG in London. “This bodes well for the first quarter, it shouldn’t show a contraction and makes recession less likely. Sterling is a bit better bid as a result.”

The pound climbed 0.4 percent to $1.58 at 10:38 a.m. London time after appreciating 0.5 percent yesterday. The currency advanced 0.2 percent to 84.77 pence per euro, trimming this week’s decline to 2.1 percent.

Gross domestic product dropped 0.2 percent from the third quarter, confirming the previous estimate, the Office for National Statistics said in London. Consumer spending increased 0.5 percent beating a forecast for a 0.2 percent expansion in a Bloomberg News survey.

Weekly Drop

The pound still headed for its biggest weekly drop against the euro since June after the minutes showed Adam Posen and David Miles voted for a 75 billion-pound boost in quantitative easing at this month’s meeting, instead of the 50 billion pounds supported by the other seven policy makers.

The pound has weakened 1.9 percent over the previous three months and 3.7 percent over the past year, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies.

The yield on the 10-year gilt dropped two basis points to 2.08 percent. The 3.75 percent bond due September 2021 gained 0.13, or 1.30 pounds per 1,000-pound face amount, to 114.33.

Gilts have handed investors a 1.4 percent loss this year, after returning almost 17 percent in 2011, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German debt fell 0.2 percent, while U.S. Treasuries slid 0.4 percent, the indexes show.

--Editors: Nicholas Reynolds, Michael Shanahan

To contact the reporter on this story: Emma Charlton in London at

To contact the editor responsible for this story: Daniel Tilles at

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