Bloomberg News

Pound Climbs 3rd Day Versus Dollar as Confidence Rises

January 31, 2013

The pound rose for a third day against the dollar after reports showed U.K. consumer confidence and house prices both increased in January.

Sterling advanced from near 13-month low versus the euro as the data spurred optimism the Bank of England’s credit-easing program is helping to encourage lending and boost the economy. A report yesterday showed U.K. mortgage approvals rose in December. Government bonds rose.

“The improvement on consumer confidence and recent data, particularly bank lending, suggested that perhaps the Bank of England’s policy is starting to feed through into the real economy,” said Eimear Daly, head of market analysis at Monex Europe Ltd. in London. “That should make sentiment toward the pound less negative, given that it was battered lately.”

The pound gained 0.4 percent to $1.5857 at 5:04 p.m. in London after rising to $1.5859, the highest level since Jan. 23. The U.K. currency appreciated 0.3 percent to 85.66 pence per euro after dropping to 86.07 pence yesterday, the weakest since December 2011.

An index of U.K. consumer confidence increased to minus 26 from minus 29 in December, GfK NOP Ltd. said. The average cost of a British home rose 0.5 percent from December to 162,245 pounds, according to Nationwide Building Society. U.K. lenders granted 55,785 mortgages last month, the most since January 2012, the central bank said yesterday.

Monthly Loss

Britain’s currency is still heading for a sixth month of losses against the euro, dropping 5.5 percent in January, while it has fallen 2.5 percent against the dollar.

The pound has slumped 3.2 percent this month, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-market currencies. The euro rose 2.9 percent and the dollar dropped 0.4 percent.

The 10-year gilt yield fell two basis points, or 0.02 percentage point, to 2.10 percent. The 1.75 percent bond maturing in September 2022 gained 0.145, or 1.45 pounds per 1,000-pound face amount, to 97. The yield has risen 27 basis points this month.

Gilts advanced along with German bunds and Treasuries as companies from Royal Dutch Shell Plc (RDSA) to Diageo Plc (DGE) reported results that fell short of analysts’ estimates, underpinning demand for safer assets.

“This appears to be a risk-off day with equities looking a bit shaky,” said Jason Simpson, a fixed-income strategist at Banco Santander SA in London. “Our medium-term view is still for gilt yields to be higher. Growth is seen as sufficiently strong enough to prevent the need for more stimulus.”

U.K. government securities have handed investors a loss of 2.1 percent in January through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bunds dropped 2 percent and Treasuries fell 0.9 percent.

To contact the reporters on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net; Neal Armstrong in London at narmstrong8@bloomberg.net

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


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