Bloomberg News

Pound Snaps Two-Day Drop Versus Euro Before Minutes; Gilts Rise

June 19, 2013

The pound snapped a two-day decline against the euro before the Bank of England releases minutes of its June 5-6 policy meeting, Governor Mervyn King’s last before Mark Carney takes over on July 1.

Sterling was little changed against the dollar as investors awaited the end of the Federal Reserve’s two-day policy meeting that may signal when the U.S. central bank will slow its bond-buying program. The Bank of England kept its target for asset purchases at 375 billion pounds ($587 billion) this month. King and two other policy makers were outvoted in May as the nine-member Monetary Policy Committee decided against boosting stimulus.

“If the majority against quantitative easing becomes more pronounced, that could be beneficial for sterling,” said Jeremy Stretch, head of currency strategy at Canadian Imperial Bank of Commerce. “If there were to be a switcher or more, that would potentially provide a bit of lift temporarily.”

The pound was little changed at 85.61 pence per euro at 9:27 a.m. in London after depreciating yesterday to 85.85 pence, the weakest since May 30. Sterling traded at $1.5653 after slipping to $1.5566 yesterday, the lowest since June 11.

Fed Chairman Ben S. Bernanke will hold a press conference today in Washington after policy makers end their meeting. Bernanke said last month the central bank could reduce its $85 billion in monthly bond purchases if there’s sustainable improvement in employment.

Pound Advances

The pound has strengthened 3.3 percent in the past three months, the best performer after the euro among 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. Europe’s common currency gained 3.7 percent, while the dollar fell 0.7 percent.

U.K. government bonds rose, with the 10-year gilt yield falling two basis points, or 0.02 percentage point, to 2.12 percent. The 1.75 percent security due in September 2022 rose 0.17, or 1.70 pounds per 1,000-pound face amount, to 96.94. Two-year rates decreased one basis point to 0.44 percent.

Gilts handed investors a loss of 1.8 percent this year through yesterday, according to Bloomberg World Bond Indexes. German bonds dropped 1 percent and Treasuries declined 1.1 percent, the indexes show.

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

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


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