Bloomberg News

Pound Rises Versus Dollar as Home Loans Gain to Nine-Month High

November 23, 2012

The pound strengthened against the dollar, set for its first weekly advance in a month, after a British Bankers Association report showed mortgage approvals rose to a nine-month high in October.

The U.K. currency fell to its weakest level in four weeks against the euro before European finance ministers meet on Nov. 26 to find a way to plug Greece’s budget shortfall. Gilts were little changed, with 10-year yields set for their first weekly increase since Oct. 19. A report next week will show U.K. gross domestic product grew 1 percent in the third quarter, confirming an earlier reading, according to the median estimate of 24 economists surveyed by Bloomberg News.

“A lot of the pound strength is it tracking the euro against the dollar, as if you look at pound-euro, sterling is going to finish lower on the week,” said Lee McDarby, head of dealing on the corporate and institutional treasury desk at Investec Bank Plc in London. “The main figure driving the pound recently has been GDP. Revisions are due on Tuesday so if we see an upwards revision then” the pound may extend this week’s advance.

The pound advanced 0.6 percent to $1.6030 at 4:13 p.m. London time, after touching $1.6035, the most since Nov. 7. The U.K. currency is set for a 0.9 percent weekly gain. Sterling was little changed at 80.87 pence per euro after touching 81.09 pence, the weakest since Oct. 24.

Mortgage Approvals

Sterling has gained 1.1 percent this year, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-market currencies. The euro and dollar dropped 2.3 percent.

U.K. mortgage approvals rose to 33,039 from a revised 31,544 a month earlier. The median estimate of 11 analysts in a Bloomberg News survey was for a 32,000 increase.

The 10-year gilt yield was at 1.84 percent. The 1.75 percent bond due September 2022 traded at 99.17. The rate has climbed 12 basis points, or 0.11 percentage point, this week.

Any cut in the U.K.’s AAA rating would represent a buying opportunity, Steven Major, global head of fixed-income research at HSBC Holdings Plc in London, wrote in client note today. Moody’s Investors Service said Nov. 14 it would assess the U.K.’s top rating at the beginning of next year as the economy slows.

Euro-region finance ministers will meet on Nov. 26 to discuss ways to unlock international loans for Greece and prevent it from dropping out of the shared currency. The nation has been negotiating with euro-area politicians and the International Monetary Fund over the steps needed to qualify for the release of loan installments frozen since June.

Gilts returned 2.6 percent this year through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bunds gained 3.4 percent and U.S. Treasuries earned 2.4 percent.

To contact the reporter on this story: David Goodman in London at dgoodman28@bloomberg.net

To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net


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