U.K. Pound Rises Against Dollar as Factory Index Climbs to Six-Month High
The pound strengthened for the first time in three days against the dollar after an index of U.K. factory orders rose to a six-month high in February.
Sterling fell to a 10-week low against the euro after Bank of England policy maker David Miles said he voted to add 75 billion pounds ($118 billion) to the central bank’s stimulus plan this month because the U.K. economy is in a “precarious situation.” Economists estimate a report tomorrow will confirm Britain’s economy contracted in the fourth quarter.
“The manufacturing data was better than expected, it underlines that the sector isn’t doing that badly,” said Simon Smith, chief economist at foreign-exchange broker FXPro Group Ltd. in London. “For the moment we are still negative on the pound. We are still in that territory of wondering whether we will see negative growth in the first quarter of this year.”
Sterling advanced 0.2 percent to $1.5696 at 5:08 p.m. London time, trimming yesterday’s 0.7 percent decline. The currency dropped 0.3 percent to 84.78 pence per euro, after depreciating to 84.89 pence, the weakest since Dec. 12.
The factory orders gauge climbed to minus 3 from minus 16 in January, the Confederation of British Industry said in a report. That’s the strongest since August. A measure of export orders jumped to minus 2 from minus 26.
Pound Weakness
The pound has fallen 2.1 percent against the euro this week as Greece won 130 billion euros ($173 billion) in aid, fueling optimism policy makers are containing the sovereign debt crisis.
Sterling weakened yesterday after minutes of this month’s Bank of England meeting showed two policy makers voted for a larger increase in asset purchases than the amount agreed upon. Policy maker Adam Posen joined Miles in wanting a 75 billion- pound boost in quantitative easing, instead of the 50 billion pounds supported by the other seven policy makers.
“There hasn’t really been much of a recovery from what was one of the deepest recessions in the history of this country,” Miles told CNBC in a television interview, which was also published on its website today.
The pound has dropped 1.2 percent in the past week according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies. That extends its one-year loss to 4.7 percent, the indexes show.
The U.K. economy shrank 0.2 percent in the fourth quarter, according to the median estimate of economists in a Bloomberg News survey before the government releases the data tomorrow. That would confirm the initial numbers released on Jan. 25.
The 10-year gilt yield was little changed at 2.1 percent. The 3.75 percent bond due September 2021 traded at 114.2. Two- year yields were also little changed, at 0.39 percent.
Gilts have handed investors a 1.5 percent loss this year, after returning almost 17 percent in 2011, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German debt slipped 0.2 percent, and U.S. Treasuries fell 0.5 percent, the indexes show.
To contact the reporter on this story: Emma Charlton in London at echarlton1@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
Rate this Page