Bloomberg News

Pound Rises on Retail Sales as Gilts Drop After Auction

April 11, 2012

The pound rose the most this month against the dollar after an industry report showed retail sales increased in March, boosting the appeal of U.K. assets.

Sterling advanced for the first time in six days against the yen as European stocks and Spanish bonds rallied, easing concern the region’s debt crisis is worsening. Gilts fell as the retail-sales data added to signs the U.K. economy is improving, damping demand for the safety of government debt. The U.K. sold 4.5 billion pounds ($7.2 billion) of five-year notes.

“Sterling will be one of the places to go to when confidence returns to global markets,” said Neil Jones, head of European hedge-fund sales at Mizuho Corporate Bank Ltd. in London. “U.K. data has been showing some kind of green shoots of recovery recently.”

The pound advanced 0.2 percent to $1.5891 at 4:44 p.m. London time after climbing as much as 0.5 percent, the most since March 30. The U.K. currency climbed 0.5 percent to 128.60 yen, and was little changed at 82.47 pence per euro.

Sales at U.K. stores open at least 12 months gained 1.3 percent last month from a year earlier, after dropping 0.3 percent in February, the London-based British Retail Consortium said. Data last week showed U.K. services growth unexpectedly accelerated and manufacturing and construction strengthened.

Sterling has appreciated 0.8 percent this year, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies. The euro weakened 0.5 percent, and the dollar dropped 1.7 percent.

The Stoxx Europe 600 Index rose 0.7 percent, and Spain’s 10-year bond yield dropped 10 basis points to 5.87 percent.

‘Good Cap’

The pound may “have difficulties” extending gains beyond $1.59, said Roberto Mialich, a senior currency strategist at UniCredit SpA (UCG) in Milan. Any advance to $1.60 “should remain a good cap unless there’s something really positive” for the U.K. economy, he said.

The yield on the 10-year gilt climbed four basis points, or 0.04 percentage point, to 2.05 percent. The 4 percent bond maturing in March 2022 fell 0.425, or 4.25 pounds per 1,000- pound face amount, to 117.365. The five-year yield increased two basis points to 0.96 percent.

The U.K. sold 1 percent notes due in September 2017 at an average yield of 1.147 percent, the Debt Management Office said. The government last auctioned the maturity on March 7 at a yield of 1.198 percent.

To contact the reporter on this story: Lukanyo Mnyanda in Edinburgh at lmnyanda@bloomberg.net

To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

April 11 (Bloomberg) -- Steven Saywell, head of foreign-exchange strategy for Europe at BNP Paribas SA, talks about the outlook for the dollar, euro and yen. He speaks with Maryam Nemazee on Bloomberg Television's "The Pulse." (Source: Bloomberg)

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