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Old 06-06-2013, 05:39 PM
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Default Pound Gains Most in 6 Weeks as BOE Refrains From Adding Stimulus

By Lucy Meakin - Jun 6, 2013 12:13 PM ET
The pound rose the most in six weeks versus the dollar as the Bank of England refrained from adding to stimulus measures that debase the currency at Governor Mervyn King’s final meeting amid signs growth is accelerating.
Gilts fell after European Central Bank President Mario Draghi said the institution kept further measures, including negative deposit rates, on the shelf at this month’s meeting. A Halifax report showed British house prices increased for a fourth month in May, adding to signs the economy is recovering. The pound is the worst performer among Group of Seven countries since King became central-bank governor in July 2003, according to Bloomberg Correlation-Weighted Indexes.
“I probably will tweak my sterling forecasts just to make them a bit stronger by the end of the year on the back of the data that we’ve seen,” said Jane Foley, senior currency strategist at Rabobank International in London. “Everybody anticipated that it would be a fairly non-event meeting today”from the Bank of England.
The pound climbed 1.2 percent to $1.5585 at 5:06 p.m. London time after rising to $1.5621, the highest level since Feb. 13. The U.K. currency was little changed at 84.98 pence per euro after appreciating to 84.80 pence, the strongest since May 21.
Sterling has gained 4.5 percent in the past three months, the best performer among 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes, on fading speculation the central bank would undertake more stimulus. The dollar gained 0.3 percent and the euro strengthened 2.7 percent.
Pared Gaines

The pound erased gains versus the euro after the ECB kept its main interest rate at 0.5 percent and Draghi said the euro-area economy will return to growth by the end of the year, handing policy makers a reason to hold back fresh stimulus.
“Euro-area economic activity should stabilize and recover in the course of the year albeit at a subdued pace,” Draghi told reporters in Frankfurt today.
The 10-year gilt yield rose two basis points, or 0.02 percentage point, to 2.02 percent. It reached 2.06 percent on June 3, the highest level since March 8. The price of the 1.75 percent bond due in September 2022 fell 0.13, or 1.30 pounds per 1,000-pound face amount, to 97.69.
The Bank of England kept its target for bond purchases at 375 billion pounds, a decision predicted by all except one of 43 estimates in a Bloomberg survey.
Interest Rate

The Monetary Policy Committee also held the U.K.’s maininterest rate at 0.5 percent. King’s successor Mark Carney takes over on July 1.
“This could keep sterling supported for the time being,”Valentin Marinov, head of European Group of 10 currency strategy at Citigroup Inc. in London, wrote in a note to clients before the decision.
The U.K. currency has weakened 24 percent in the 10 years since King became BOE governor, the Bloomberg Correlation-Weighted Indexes show, as policy makers cut the benchmark interest rate to a record-low 0.5 percent from as high as 5.75 percent in 2007.
U.K. home values rose 0.4 percent in May from the previous month to an average 166,898 pounds, the highest since August 2010, Halifax, the mortgage unit of Lloyds Banking Group Plc, said in a statement.
Gilts have posted the worst performance among G-7 nations over the past month, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. The securities lost 2.4 percent since May 6, outperforming only South Africa among the 26 sovereign-debt markets tracked by the indexes.
To contact the reporter on this story:Lucy Meakin in London at
To contact the editor responsible for this story: Paul Dobson at
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