Pound Climbs in Week With BNP Saying Buy Before Bank of England

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The pound climbed against the dollar this week as investors prepared for an unprecedented flood of Bank of England data on a single day next week that BNP Paribas SA said should support the U.K. currency.

Sterling advanced 0.9 percent versus its U.S. peer and made gains against most of the currencies of the U.K.’s developed-market counterparts. The BOE is changing its policy of staggering releases over two weeks and instead will publish simultaneously its policy decision, economic forecasts, minutes of the Monetary Policy Committee meeting and officials’ votes -- all on Aug. 6.

“It’s the vote that’s going to be important,” said Steven Saywell, London-based global head of foreign-exchange strategy at BNP Paribas. MPC members voting for a rate increase “could push the pound up to 70 pence per euro or even above. The market need to bring forward the timing of its tightening cycle.”

The pound added 0.3 percent to $1.5644 on Friday as of 5:07 p.m. London time, as the dollar weakened after a report showed wages and salaries in the U.S. rose at the slowest pace on record in the second quarter. Sterling depreciated 0.6 percent to 70.55 pence per euro versus Thursday, erasing its weekly gain, as core inflation in the euro area unexpectedly accelerated to the fastest in 15 months.

Sterling Forecasts

BNP Paribas, which is among the highest-ranked forecasters of sterling against the euro, predicted the pound would appreciate to 67.50 pence within three to six months. That level was last seen in 2007. The top forecaster, Ebury Partners, sees the pound strengthening to 67 pence per euro by year-end.

The pound had climbed against the euro for six of the past seven months through June, as traders weighed the outlook for a rate increase. Investors are speculating that rates will rise in June, according to forward contracts based on the sterling overnight index average, or Sonia. As recently as July 10, they were betting on August 2016.

The yield on U.K. two-year gilts fell six basis points, or 0.06 percentage point, in the week to 0.57 percent. The 1.75 percent security due in January 2017 rose 0.075, or 75 pence per 1,000-pound face amount, to 101.73.

“We are calling for U.K. two-year yields to rise to 100 basis points by year end,” BNP’s Saywell said. “What we need to get there are catalysts to tell the market it is being a bit complacent.”

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