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Pound Advances on Report Carney Sees No Need for More Stimulus - (Bloomberg)

Posted by Chris Advincula on Sep 27, 2013 5:24:00 AM

The pound advanced, approaching the highest level versus the dollar in eight months, after Bank of England Governor Mark Carney told a U.K. newspaper he sees no case for further stimulus.

Sterling strengthened versus all but two of its 16 major peers as a gauge of U.K. consumer confidence climbed to the highest in almost six years in September and house prices rose for a fifth month. Carney told the Yorkshire Post the central bank would consider expanding its asset-purchase target, known as quantitative easing, should the economic recovery falter. U.K. government bonds were little changed, with 10-year gilts set for their biggest weekly advance since March.

“This sits with the tone we’ve seen recently from the Bank of England, where there was an absence of very dovish rhetoric,” said Jane Foley, senior currency strategist at Rabobank International in London. “The message is that there may be further asset purchases should the recovery stall, but the data suggest that things are returning to normal. The market has quashed most of its hopes that there could be more QE,” supporting the pound.

The pound rose 0.2 percent to $1.6065 at 9:58 a.m. London time after climbing to $1.6163 on Sept. 18, the highest since Jan. 11. Sterling was little changed at 84.07 pence per euro after appreciating to 83.53 pence on Sept. 18, the strongest since Jan. 17.

Sentiment Improves

GfK NOP Ltd.’s consumer-sentiment index rose to minus 10 this month, the highest since November 2007, from minus 13 in August, the London-based group said. U.K. house prices increased 0.9 percent after climbing an upwardly revised 0.7 percent in August, Nationwide Building Society said.

“Given the recovery has strengthened and broadened, I don’t see a case for quantitative easing and I have not supported it,” Carney said, according to the Yorkshire Post.

The pound has risen 6.4 percent in the past six months, the best performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar weakened 0.5 percent and the euro gained 5.8 percent.

Chancellor of the Exchequer George Osborne will introduce annual checks with the Bank of England on whether his Help-to-Buy program is fueling excessive price increases in the housing market, the Treasury said in an e-mailed statement today.

Osborne and the central bank’s Financial Policy Committee will reassess the program, which helps buyers purchase homes with as little as a 5 percent deposit, every September starting next year. The FPC will advise Osborne on whether key parameters, such as the price cap and the fee charged to lenders, remain appropriate.

‘Anchor Expectations’

The U.K. currency is “deriving support from Governor Carney’s comments on QE,” Derek Halpenny, European head of global-markets research at Bank of Tokyo-Mitsubishi UFJ Ltd. in London, wrote in a note. The financial committee’s assessment of Osborne’s program “will remove the potential burden on interest rates as the tool for managing the macro-economy which will certainly help anchor expectations about when the BOE finally raises rates,” he wrote.

The benchmark 10-year gilt yielded 2.74 percent. The rate has dropped 18 basis points this week, the most since the period ended March 1. The price of the 2.25 percent bond due in September 2023 was at 95.80.

The two-year yield was at 0.44 percent, while the implied yield on short-sterling contracts expiring in March 2015 was little changed at 0.96 percent.

U.K. gilts lost 3.3 percent this year through yesterday, according to Bloomberg World Bond Indexes. German securities dropped 1.7 percent and Treasuries fell 2.5 percent. 

 

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Chart: WorldWideMarkets Flash Trader

 

 

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Source: Bloomberg

 

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