Pound Gains Most in 15-Months on BOE Stimulus Pause Bets

The pound had its biggest weekly advance against the dollar in more than 15 months as investors bet the Bank of England will pause its stimulus plan amid rising inflation expectations.

The yield on 10-year gilts rose for the first time in five weeks after minutes of the central bank’s April 4-5 meeting showed officials said inflation may accelerate at a faster pace than previously forecast. Sterling appreciated to the strongest level in more than 19-months against the euro as separate reports showed U.K. home price and retail sale rose. U.S. data showed more Americans than forecast filed claims for jobless benefits and sales of previously owned homes dropped.

“The mood in the pound remains upbeat, with good reason,” said Daragh Maher, a currency strategist at HSBC Holdings Plc in London. “Given the market’s appetite to buy the pound on any dips, the uptrend still looks to have legs.”

The pound rose for the first week in three against the dollar, climbing 1.8 percent to trade at $1.6124 a 4:54 p.m. London time yesterday. That’s the biggest move since the five days ended Jan. 14, 2011. It touched $1.6143, the most since Oct. 31. Sterling strengthened 0.7 percent to 81.93 pence per euro. It appreciated to 81.62 pence on April 19, the strongest level since Aug. 26, 2010.

Retail Sales

Asking prices for U.K. homes rose to a record in April, according to a Rightmove Plc report published April 16. Separate data released yesterday showed retail sales rose at the fastest pace for more than a year in March.

Short-sterling futures fell in the week, indicating investors are adding to bets that interest rates will increase, after the Bank of England minutes also showed policy maker Adam Posen dropped his push for extra stimulus this month. They were published a day after data showed U.K. inflation unexpectedly accelerated in March for the first time in six months.

Posen also told reporters that the U.K. economy will be “stronger” than official data will show in the first half of the year. Gross domestic product expanded 0.1 percent after a 0.3 percent contraction in the fourth quarter, according to the median of 40 estimates in a Bloomberg survey.

The Debt Management Office plans to sell as much as three billion pounds of bills on April 27. The agency will sell 3.75 percent 2052 gilts through banks.

The 10-year gilt yields rose 13 basis points in the week, or 0.13 percentage point, to 2.17 percent. It reached 2.21 percent yesterday, the most since April 5. The 4 percent security due March 2022 traded at 116.16.

at or Daniel Tilles at dtilles@bloomberg.net.

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