Pound Advances for Fourth Day Versus Euro as Monti’s Exit Looms
The pound strengthened for a fourth day against the euro after Italian Prime Minister Mario Monti said he intends to resign, boosting demand for the relative safety of British assets.
Sterling rose against most of its 16 major peers after a gauge of full-time hiring in the U.K. rose to a 19-month high. Monti will try to persuade his coalition government to pass budget legislation before handing in his “irrevocable resignation,” President Giorgio Napolitano’s office said Dec. 8. Monti’s predecessor Silvio Berlusconi said on the same day he will run for prime minister in next year’s election. U.K. government bonds declined.
“We’re a bit risk off but we’re certainly not reaching any sort of panic as of yet,” said Owen Callan, an analyst at Danske Bank A/S (DANSKE) in Dublin. “With Berlusconi back on the scene there’s a bit of extra uncertainty. We should see the safe havens outperform for the first half of the week.”
The pound gained 0.2 percent to 80.44 pence per euro at 4:18 p.m. London time after appreciating to 80.33 pence, the strongest level since Nov. 21. The U.K. currency advanced 0.2 percent to $1.6069.
Under Italian rules, an election may come as soon as February. Monti will hand in his final resignation after making an attempt to muster parliamentary support for the 2013 budget law. Italy’s economy shrank for a fifth quarter in the three months through September, a government report showed today.
A gauge of permanent U.K. job placements climbed to 56 last month from 55 in October, KPMG LLP and the Recruitment and Employment Confederation said in an e-mailed report. Readings above 50 indicate an increase. The data showed signs of “cautious optimism,” the groups said.
Sterling has gained 1.4 percent this year, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-market currencies. The euro declined 2.6 percent and the dollar fell 2.3 percent.
Gilts dropped for a second day, with the 10-year yield rising three basis points, or 0.03 percentage point, to 1.77 percent. The 1.75 percent bond due in September 2022 fell 0.25, or 2.50 pounds per 1,000-pound face amount, to 99.82. The yield earlier declined to 1.72 percent, the lowest since Nov. 16.
The Debt Management Office will publish tomorrow minutes of its quarterly meeting with primary dealers and investors held today. The debt office bases the issuance program on its consultation with market participants to make sure it meets the demands of the market.
U.K. government bonds returned 3 percent this year through Dec. 7, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bunds gained 4.3 percent and U.S. Treasuries rose 2.7 percent.