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Pound Rises to 1-Week High After U.K. Jobs Report; Gilts Fall - (Bloomberg)

Posted by Chris Advincula on Oct 16, 2013 6:47:00 AM

The pound strengthened to a one-week high against the dollar after a government report showed U.K. jobless claims dropped the most in 16 years last month amid signs the labor market is improving.

Sterling climbed for a third day versus the euro as the jobless rate held at 7.7 percent in the three months through August. Bank of England Governor Mark Carney has said policy makers won’t consider raising the key interest rate from a record-low 0.5 percent until unemployment falls to 7 percent. U.S. Senate leaders are rushing to lock down an agreement to end the fiscal impasse that threatens a default by the world’s largest economy. U.K. government bonds declined for a third day.

“The follow-through in the pound is pretty limited,” said David Simmonds, the London-based head of currency and emerging-markets strategy at Royal Bank of Scotland Group Plc. “Markets are absolutely fixated with watching what’s going on in Washington.”

The pound rose 0.3 percent to $1.6043 at 11:24 a.m. London time after touching $1.6059, the highest since Oct. 9. The U.K. currency strengthened 0.2 percent to 84.40 pence per euro. It depreciated to 85.10 pence on Oct. 11, the weakest level since Sept. 2.

Claims for unemployment benefit fell 41,700, the most since June 1997, the Office for National Statistics said in London today. The decline exceeded the 25,000 median forecast in a Bloomberg survey of economists. Unemployment fell by 18,000 to 2.49 million people in the three months through August. Employment rose 155,000 to a record 29.9 million.

Jobless Rate

“For now things are going the Bank of England’s way, with stronger employment growth not being reflected in a falling ILO unemployment rate,” David Tinsley, an economist at BNP Paribas SA in London, wrote in an e-mailed note.

The jobless rate, as measured by International Labour Organisation standards, was unchanged from the quarter through July, the Office for National Statistics in London said today. That was in line with the median estimate of economists surveyed by Bloomberg News.

“Achieving the 7 percent target is still going to be a challenge,” strategists at Morgan Stanley including Hans Redeker in London wrote in an e-mailed note. “Hence, we would expect any pound gains to remain limited.”

DMO Sale

Sterling appreciated 3.8 percent in the past three months, the best performer after New Zealand’s dollar among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro strengthened 0.6 percent and the U.S. dollar slid 2.5 percent.

Benchmark 10-year gilt yields rose two basis points, or 0.02 percentage point, to 2.83 percent, the highest level since Sept. 24. The 2.25 percent bond maturing in September 2023 fell 0.185, or 1.85 pounds per 1,000-pound face amount, to 95.05.

The Debt Management Office is scheduled to auction 4.75 billion pounds of five-year government bonds tomorrow.

U.K. gilts lost 3.6 percent this year through yesterday, according to Bloomberg World Bond Indexes. Treasuries dropped 2.8 percent and German securities declined 2.3 percent. 

 

GBP.10.16.7AM resized 600

Chart: WorldWideMarkets Alpha Trader

 

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Source: Bloomberg

 

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