The pound gained versus the euro this week as reports strengthened speculation that the U.K. economy is recovering fast enough to withstand tighter monetary policy while other European economies require more stimulus.
Sterling touched the strongest level in 22 months against the 18-nation shared currency this week as data showed Britain had the fastest inflation relative to the euro-area rate in eight months.
U.K. government bonds rose for a second week amid concern the downing of an airliner over Ukraine would escalate that nation’s crisis, boosting demand for haven assets.
“The broad case for sterling outperformance still stands,” said Peter Kinsella, a senior currency strategist at Commerzbank AG in London. At the same time, the dollar also rose against the common currency, signaling it could “be more a case of the euro being weak.”
The pound strengthened 0.4 percent this week to 79.18 pence per euro at 5 p.m. London time yesterday, after touching 78.89 on July 17, the strongest level since September 2012. Sterling slid 0.3 percent to $1.7068 in the past five days, having appreciated to $1.7192 on July 15, the highest since October 2008.
The euro slipped 0.7 percent to $1.3514. U.K. consumer prices rose 1.9 percent in June from a year earlier, up from a 1.5 percent annual rate in May, the Office for National Statistics said on July 15. That was more than the 1.6 percent median forecast of 35 economists in a Bloomberg News survey.
Two days later, the European Union’s statistics office in Luxembourg said annual consumer-price growth in the countries that share the euro stayed at 0.5 percent, supporting the case for more easing to accelerate price growth.
Pound’s Peers
The pound rose 11 percent in the past year, the best performer among 10 major currencies tracked by Bloomberg Correlation-Weighted Indexes. Investors added to bets that the Bank of England will lead its major counterparts in raising interest rates.
The euro rose 1.1 percent, while the dollar fell 2.4 percent. A report from the Office for National Statistics next week will show that retail sales including auto fuel rebounded last month, rising 0.3 percent from the month earlier, when they dropped 0.5 percent, according to a Bloomberg survey of economists.
The U.K. is scheduled to sell 3.25 billion pounds of 2024 bonds on July 22. Forward contracts based on the sterling overnight interbank average, or Sonia, show investors are expecting U.K. borrowing costs will increase 25 basis points by February.
The U.K.’s benchmark interest rate is at a record-low 0.5 percent, compared with 0.15 percent in the euro area. The yield on benchmark U.K. 10-year (GUKG10) gilts fell three basis points, or 0.03 percentage point, this week to 2.57 percent.
The 2.25 percent bond maturing in September 2023 gained 0.13, or 1.30 pounds per 1,000-pound face amount to 97.41.
Gilts returned 4.3 percent this year through July 17, Bloomberg World Bond Indexes show. That compares with a 5.5 percent gain for German securities and 3.6 percent for Treasuries.
bloomberg.com
Sterling touched the strongest level in 22 months against the 18-nation shared currency this week as data showed Britain had the fastest inflation relative to the euro-area rate in eight months.
U.K. government bonds rose for a second week amid concern the downing of an airliner over Ukraine would escalate that nation’s crisis, boosting demand for haven assets.
“The broad case for sterling outperformance still stands,” said Peter Kinsella, a senior currency strategist at Commerzbank AG in London. At the same time, the dollar also rose against the common currency, signaling it could “be more a case of the euro being weak.”
The pound strengthened 0.4 percent this week to 79.18 pence per euro at 5 p.m. London time yesterday, after touching 78.89 on July 17, the strongest level since September 2012. Sterling slid 0.3 percent to $1.7068 in the past five days, having appreciated to $1.7192 on July 15, the highest since October 2008.
The euro slipped 0.7 percent to $1.3514. U.K. consumer prices rose 1.9 percent in June from a year earlier, up from a 1.5 percent annual rate in May, the Office for National Statistics said on July 15. That was more than the 1.6 percent median forecast of 35 economists in a Bloomberg News survey.
Two days later, the European Union’s statistics office in Luxembourg said annual consumer-price growth in the countries that share the euro stayed at 0.5 percent, supporting the case for more easing to accelerate price growth.
Pound’s Peers
The pound rose 11 percent in the past year, the best performer among 10 major currencies tracked by Bloomberg Correlation-Weighted Indexes. Investors added to bets that the Bank of England will lead its major counterparts in raising interest rates.
The euro rose 1.1 percent, while the dollar fell 2.4 percent. A report from the Office for National Statistics next week will show that retail sales including auto fuel rebounded last month, rising 0.3 percent from the month earlier, when they dropped 0.5 percent, according to a Bloomberg survey of economists.
The U.K. is scheduled to sell 3.25 billion pounds of 2024 bonds on July 22. Forward contracts based on the sterling overnight interbank average, or Sonia, show investors are expecting U.K. borrowing costs will increase 25 basis points by February.
The U.K.’s benchmark interest rate is at a record-low 0.5 percent, compared with 0.15 percent in the euro area. The yield on benchmark U.K. 10-year (GUKG10) gilts fell three basis points, or 0.03 percentage point, this week to 2.57 percent.
The 2.25 percent bond maturing in September 2023 gained 0.13, or 1.30 pounds per 1,000-pound face amount to 97.41.
Gilts returned 4.3 percent this year through July 17, Bloomberg World Bond Indexes show. That compares with a 5.5 percent gain for German securities and 3.6 percent for Treasuries.
bloomberg.com
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