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Pound Rises Fifth Day Versus Euro as UK Construction Increases - (Bloomberg)

Posted by Chris Advincula on Sep 3, 2013 7:31:00 AM

The pound rose for a fifth day versus the euro as a report showed a gauge of U.K. construction based on a survey of purchasing managers increased for a fourth month in August, reaching the highest in almost six years.

Sterling reached a three-month high versus the common currency before Bank of England policy makers meet this week. U.K. construction activity climbed to 59.1 last month from 57 in July, Markit Economics and the Chartered Institute of Purchasing and Supply said. The median estimate in a Bloomberg News survey was 56.9. The pound also rose as Verizon Communications Inc. agreed to buy Vodafone Group Plc (VOD)’s 45 percent stake in Verizon Wireless for $130 billion.

“The pound is boosted by the assumption that the data is looking much better in the course of recent weeks,” said Jeremy Stretch, head of currency strategy at Canadian Imperial Bank of Commerce in London. “Markets have perhaps realized that they’ve been maintaining sterling net-short positions for too long. Vodafone news also helps.” A short position is a bet that an asset price will fall.

The pound appreciated 0.4 percent to 84.59 pence per euro at 9:59 a.m. London time after reaching 84.46 pence, the strongest level since May 21. Sterling gained 0.2 percent to $1.5571.

The latest reading in U.K. construction output showed the fastest expansion since September 2007, Markit said in a statement. Manufacturing output rose to a 2 1/2-year high of 57.2 last month, a report showed yesterday. A reading above 50 indicates expansion.

Policy Meeting

The Bank of England’s nine-member Monetary Policy Committee will keep its asset-purchase target at 375 billion pounds on Sept. 5, according to all 38 economists in a Bloomberg survey. Officials will also hold the main interest rate at a record-low 0.5 percent as they assess the impact of forward guidance, a separate survey showed.

The pound strengthened 6.7 percent in the past six months, the best performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro gained 4 percent and the dollar climbed 2.7 percent.

U.K. government bonds were little changed after benchmark yields earlier rose to the highest level in more than two years.

The 10-year gilt yielded 2.84 percent after reaching 2.87 percent, the highest since Aug. 1, 2011. The price of the 2.25 percent bond maturing in September 2023 was at 94.92.

The Debt Management Office is scheduled to sell 1.5 billion pounds of inflation-linked bonds due in 2024 today.

Gilts lost 4.1 percent this year through yesterday, according to Bloomberg World Bond Indexes. German bonds dropped 2.4 percent and Treasuries declined 3.3 percent. 

 

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