The pound strengthened for a fourth week against the euro as a jump in U.K. retail sales stoked speculation the Bank of England will hasten its plans to raise interest rates as the economy expands.
The pound rose for the first time in three weeks against the dollar as minutes of this month’s central bank meeting showed the decision to leave borrowing costs at a record low was becoming “more balanced” for some members of the Monetary Policy Committee.
U.K. government bonds declined this week, with 10-year yields rising the most in two months, as separate reports showed inflation quickened in April for the first time in 10 months and the U.K. economy expanded in the first quarter.
“I think the pound is going to get a lot higher against the euro,” said Eimear Daly, head of market analysis at Monex Europe Ltd. in London.
“If you look at the data, people are starting to price in rate hikes.The Bank of England even admitted there may be a more balanced view, which really signals rate hikes are coming.”
The pound gained 0.5 percent this week to 81.02 pence per euro at 5 p.m. London time yesterday, when it appreciated to 80.82 pence, the strongest level since December 2012. Sterling climbed 0.1 percent to $1.6820.
Retail Sales
The U.K. currency has strengthened at least 1.1 percent against all 31 of its major peers in the past 12 months as speculation has shifted to the timing of the first increase in central bank rates and away from bets the BOE may have been prepared to add stimulus.
Sterling has gained 10 percent in the period, according to Bloomberg Correlation-Weighted Indexes, beating a 3.8 percent gain in the euro and a 2 percent drop in the dollar.
A Deutsche Bank AG trade-weighted index of the pound climbed to 83 on May 22, its strongest level since November 2008, after the Office for National Statistics said on May 21 that retail sales including auto fuel surged 1.3 percent in April after rising a revised 0.5 percent the previous month.
The gain exceeded analyst estimates for an increase of 0.4 percent. The 10-year gilt yield rose seven basis points, or 0.07 percentage point, this week to 2.64 percent, the biggest increase since the period ended March 21.
The 2.25 percent bond due in September 2023 fell 0.57, or 5.70 pounds per 1,000-pound face amount, to 96.845. Gilts lost 0.7 percent in the 12 months through May 22, underperforming Treasuries and German bonds, Bloomberg World Bond Indexes show.
The U.K. is scheduled to sell inflation-linked bonds maturing in 2052 next week, while data will show reported sales increased, according to the median estimate of economists in Bloomberg News surveys.
bloomberg.com
The pound rose for the first time in three weeks against the dollar as minutes of this month’s central bank meeting showed the decision to leave borrowing costs at a record low was becoming “more balanced” for some members of the Monetary Policy Committee.
U.K. government bonds declined this week, with 10-year yields rising the most in two months, as separate reports showed inflation quickened in April for the first time in 10 months and the U.K. economy expanded in the first quarter.
“I think the pound is going to get a lot higher against the euro,” said Eimear Daly, head of market analysis at Monex Europe Ltd. in London.
“If you look at the data, people are starting to price in rate hikes.The Bank of England even admitted there may be a more balanced view, which really signals rate hikes are coming.”
The pound gained 0.5 percent this week to 81.02 pence per euro at 5 p.m. London time yesterday, when it appreciated to 80.82 pence, the strongest level since December 2012. Sterling climbed 0.1 percent to $1.6820.
Retail Sales
The U.K. currency has strengthened at least 1.1 percent against all 31 of its major peers in the past 12 months as speculation has shifted to the timing of the first increase in central bank rates and away from bets the BOE may have been prepared to add stimulus.
Sterling has gained 10 percent in the period, according to Bloomberg Correlation-Weighted Indexes, beating a 3.8 percent gain in the euro and a 2 percent drop in the dollar.
A Deutsche Bank AG trade-weighted index of the pound climbed to 83 on May 22, its strongest level since November 2008, after the Office for National Statistics said on May 21 that retail sales including auto fuel surged 1.3 percent in April after rising a revised 0.5 percent the previous month.
The gain exceeded analyst estimates for an increase of 0.4 percent. The 10-year gilt yield rose seven basis points, or 0.07 percentage point, this week to 2.64 percent, the biggest increase since the period ended March 21.
The 2.25 percent bond due in September 2023 fell 0.57, or 5.70 pounds per 1,000-pound face amount, to 96.845. Gilts lost 0.7 percent in the 12 months through May 22, underperforming Treasuries and German bonds, Bloomberg World Bond Indexes show.
The U.K. is scheduled to sell inflation-linked bonds maturing in 2052 next week, while data will show reported sales increased, according to the median estimate of economists in Bloomberg News surveys.
bloomberg.com
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