Pound Reaches 22-Month High Versus Euro on Homes Boost

The pound reached a 22-month high against the euro after an industry report showed British house prices rose in April, boosting demand for U.K. assets.

Sterling touched an eight-month high versus the dollar after the Swiss National Bank said it almost doubled its holdings of pounds in the first quarter. The U.K. currency later erased gains versus the greenback as a technical gauge signaled its 10-day advance was overdone. Ten-year gilts rose.

“The housing data wasn’t too bad,” said Neil Jones, the head of European hedge-fund sales at Mizuho Corporate Bank Ltd. in London. “It doesn’t take a lot of positive data to boost the pound at the moment as there is so much expectation of gloom. Any glimmer of hope can help the currency appreciate.”

The pound was little changed at 81.47 pence per euro at 4:06 p.m. London time after rising to 81.23 pence, the strongest since June 2010. Sterling fell 0.2 percent to $1.6236 after climbing to $1.6302, the highest level since Aug. 31. It gained 2.6 percent over the previous two weeks.

U.K. home values rose 0.1 percent from March, when they increased 0.2 percent, the London-based property research company said in an e-mailed report. House prices gained in four of 10 regions monitored by Hometrack in April, led by a 0.3 percent gain in London.

The SNB boosted holdings of the U.K. currency by 93 percent last quarter to 14.5 billion pounds from 7.5 billion pounds in the previous three months, the Zurich-based central bank’s foreign-currency holdings report showed today.

Net Longs

Futures traders reversed bets the pound would weaken against the dollar, figures from the Washington-based Commodity Futures Trading Commission showed.

The difference in the number of wagers by hedge funds and other large speculators on an advance in the U.K. currency compared with those on a decline -- so-called net longs -- was 7,536 on April 24, compared with net shorts of 13,051 the previous week.

The pound erased its advance against the dollar as a gauge of momentum watched by some traders showed its recent gains were excessive. The relative strength index for the U.K. currency increased to 71.3 on April 27. Readings above 70 suggest a currency is overbought.

The pound rose for the previous 10 days against the dollar, the longest winning streak since June 1992.

Sterling has appreciated 1.5 percent in the past month, the second-best performer after the yen of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar dropped 0.1 percent, and the euro fell 1.1 percent.

The yield on the 10-year gilt dropped one basis point, or 0.01 percentage point, to 2.11 percent. The 4 percent bond due March 2022 gained 0.11, or 1.10 pounds per 1,000-pound face amount, to 116.70.

Debt Sales

The Debt Management Office plans to auction as much as 3.75 billion pounds of seven-year notes tomorrow, and 1.2 billion pounds of inflation-linked securities due March 2034 on May 3.

Gilts have handed investors a loss of 1.3 percent this year, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. Treasuries rose 0.1 percent, and German bunds gained 1.2 percent.

The euro may extend this year’s decline against the pound after failing to break above a key level of so-called resistance last week, Commerzbank AG said, citing trading patterns.

“Near-term rebounds have remained capped by the previous 82.21 pence January low,” Karen Jones, head of fixed-income, commodity and currency technical analysis in London, wrote in a note to clients.

The euro is poised to fall to the 2010 low of 80.67 pence over the next one to three months, Jones said.

To contact the reporter on this story: Keith Jenkins in London at kjenkins3@bloomberg.net

To contact the editors responsible for this story: Daniel Tilles at dtilles@bloomberg.net

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