The pound strengthened from a four- month low against the euro after an industry report showed U.K. mortgage approvals rose last month to the highest since April.
The pound slid to the lowest in seven weeks versus the dollar and gilts rose as stock declines spurred demand for the safety of haven assets. Government bonds also gained after the Debt Management Office sold 4.25 billion pounds ($6.8 billion) of bonds maturing in January 2044 via banks today. Sterling was boosted as economists said a report this week will show the U.K. exited a recession in the third quarter.
“Some of the data has not been too bad and there is potential for sterling outperformance,” said Gavin Friend, a foreign-exchange strategist at National Australia Bank Ltd. in London. “We are all focused on the GDP data. If the number is good we will get a good bounce in the pound and we would use that as a selling opportunity.”
The pound gained 0.2 percent to 81.38 pence per euro at 4:37 p.m. London time after depreciating to 81.65 pence yesterday, the weakest level since June 11. Sterling slid 0.6 percent to $1.5915, the weakest since Sept. 6.
Mortgage approvals rose to 31,175 from 30,683 in August, the British Bankers Association said in a statement today, the highest reading since April, when they climbed 32,070.
Data last week showed retail sales rose more than analysts estimated in September and jobless claims unexpectedly fell. Gross domestic product increased 0.6 percent, according to a Bloomberg News survey of economists before the data on Oct. 25.
Investors should sell the pound should it appreciate to $1.63 and when it strengthens to 80.80 pence per euro, National Australia Bank’s Friend said.
Sterling declined 0.7 percent in the past three months, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-market currencies. The euro gained 3.9 percent and the dollar dropped 3.6 percent.
The benchmark 10-year gilt yield fell seven basis points, or 0.07 percentage point, to 1.83 percent. The 1.75 percent security maturing in September 2022 rose 0.67, or 6.70 pounds per 1,000-pound face amount, to 99.29.
The 3.25 percent security sold today was priced eight basis points above the 4.5 percent 2042 bond due in December, the DMO said in a statement. The new bond was sold at a yield of 3.271 percent, it said.
Domestic investors bought about 92 percent of securities sold, the agency said.
The U.K. also plans to sell 900 million pounds of 0.75 percent index-linked bonds maturing in 2047 on Nov. 1, it said in a separate statement today.
Gilts returned 1.8 percent this year through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bonds gained 2.3 percent, while Treasuries earned 1.5 percent.
To contact the reporter on this story: Emma Charlton in London at email@example.com