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Pound Erases Loss Versus Euro as Retail Sales Rise for 2nd Month - (Bloomberg)

Posted by Chris Advincula on Jul 18, 2013 6:34:00 AM

By Anchalee Worrachate and Eshe Nelson - Jul 18, 2013

The pound erased losses against the euro after a report showed U.K. retail sales rose for a second month in June, adding to evidence the nation’s recovery is strengthening.

Sterling pared a decline versus the dollar. The British currency rallied versus all but two of its 16 major peers yesterday after minutes of the Bank of England’s latest meeting showed policy makers, led by new Governor Mark Carney, voted unanimously against expanding a stimulus program that tends to debase the currency. Two-year gilts rose for a third day, pushing the yield to the lowest level since May.

“We’re optimistic on sterling, not so much against the dollar, but we think it’s going to strengthen against the euro,” said Nick Parsons, head of research for U.K. and Europe at National Australia Bank Ltd. in London. “If you ask yourself would you rather own pound or euro at these levels, given what we know about the relative economic fundamentals, the answer is clearly buy sterling.”

The pound was little changed at 86.22 pence per euro at 10:49 a.m. London time after weakening to 86.47 pence earlier. It appreciated 0.6 percent yesterday, the biggest one-day gain since June 20. The U.K. currency was also little changed at $1.5209 after falling as much as 0.4 percent.

Retail sales including fuel rose 0.2 percent from May, when they surged 2.1 percent, the Office for National Statistics said today in London. That’s the first consecutive increase since July 2012. The median forecast of 20 economists in a Bloomberg News survey was for a 0.3 percent gain. From a year earlier, sales increased 2.2 percent.

Gilts Rise

The pound has weakened 0.4 percent in the past month, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies. The dollar rose 2.7 percent and the euro gained 0.4 percent.

The two-year gilt yield dropped three basis points, or 0.03 percentage point, to 0.28 percent after reaching 0.27 percent, the lowest since May 9. The 2.75 percent security due in January 2015 rose 0.03, or 30 pence per 1,000-pound face amount, to 103.71. The rate on the 10-year gilt fell four basis points to 2.26 percent.

Gilts dropped 2.4 percent this year through yesterday, according to Bloomberg World Bond Indexes. German bonds declined 0.7 percent and Treasuries fell 2.3 percent, the indexes show.

 

gbp.7.18 resized 600

euro.stg.7.18 resized 600

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