U.K. Pound Advances to 2-Month High Against Dollar as Jobless Claims Drop
The pound rose to its highest level in more than two months against the dollar as British jobless claims fell more than expected, boosting speculation the economy may continue to strengthen as the government cuts spending.
Sterling gained against 13 of its 16 most-traded peers. The number of people claiming jobless benefits in June fell by 20,800, the Office for National Statistics said, more than the median forecast of 22 economists for a drop of 20,000. Bank of England policy maker Andrew Sentance told the Reading Post newspaper that officials need to start raising interest rates. Britain sold 2.25 billion pounds ($3.4 billion) of 2046 bonds.
“The claimant count today has fallen for the fifth month in a row, and that’s encouraging,” said Chris Turner, head of foreign-exchange research at ING Groep NV in London. “Maybe there are some doubts emerging about how slow U.K. growth is going to be this year.”
The pound gained as much as 0.7 percent to trade at $1.5291, the strongest since May 3, and was at $1.5266 at 4:30 p.m. in London. The U.K. currency strengthened 0.3 percent to 83.58 pence per euro.
Sterling has gained 7.3 percent since reaching a low for the year of $1.4231 on May 20, helped by confidence that the coalition government formed after the May 6 election will reduce the deficit without sending the nation back into recession. The currency was boosted yesterday as data from the Office for National Statistics showed consumer prices rose at a faster pace than analysts estimated in June.
UBS AG today scrapped its recommendation to sell the pound against the dollar, as the U.K. currency had surpassed the bank’s upper limit to protect against greater losses.
While the Bank of England last week held the benchmark rate at a record low, Sentance last month made the first push to raise rates in almost two years.
“Inflation still provides some support for the rogue hawks on the Monetary Policy Committee,” ING’s Turner said today.
U.K. 30-year bonds fell, with the yield two basis points higher at 4.21 percent, after the nation sold 4.25 percent securities due in 2046 for an average yield of 4.17 percent.
Ten-year bonds yields were also two basis points higher at 3.40 percent.
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