The pound strengthened against the dollar and euro after Bank of England Governor-designate Mark Carney yesterday failed to signal that the central bank will expand stimulus measures that typically debase a currency.
Carney, the current chief of the Bank of Canada, will succeed Mervyn King at the U.K. central bank on July 1, taking over an institution endowed with new responsibilities for financial regulation as well as monetary policy. The Bank of England kept its asset-purchase target, or so-called quantitative easing, at 375 billion pounds ($576 billion) on April 4. Policy makers also left the key interest rate at a record-low 0.5 percent. Gilts fell, snapping a two-day gain.
“The pound is up since Carney spoke,” said Neil Jones, head of hedge fund sales at Mizuho Corporate Bank Ltd. in London. “The market was looking for something more on the QE front. They did not get it.”
The pound gained for a second day versus the dollar, rising 0.5 percent to $1.5361 at 9:50 a.m. London time after climbing 0.3 percent yesterday. The U.K. currency strengthened 0.2 percent to 85.22 pence per euro.
Sterling has dropped 3.6 percent this year, the second- worst performer among 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes after the yen. The euro advanced 1.8 percent and the dollar gained 2.6 percent.
The 10-year gilt yield rose three basis points, or 0.03 percentage point, to 1.68 percent after falling seven basis points in the past two days. The 1.75 percent security maturing September 2022 slipped 0.215, or 2.15 pounds per 1,000-pound face amount, to 100.58.
U.K. gilts earned 1.9 percent this year through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bonds and U.S. Treasuries returned 0.8 percent.
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