Pound Rises Amid Speculation SABMiller a Candidate for Takeoverby
Currency also boosted by bets BOE headed for rate hike
Sterling recovers from Friday's 4 1/2-month low vs dollar
The pound strengthened for the first time in five days versus the euro amid speculation Anheuser-Busch InBev NV is close to submitting a bid for Britain’s SABMiller Plc.
Sterling also recovered from Friday’s 4 1/2-month low versus the dollar as the prospect of the Bank of England raising interest rates gained traction. Federal Reserve Chair Janet Yellen said last week the U.S. central bank still plans to tighten policy this year, fueling an expectation that the BOE won’t be far behind.
“February 2016 looks good-to-go for the first BOE rate hike,” said Ipek Ozkardeskaya, a markets analyst at London Capital Group Ltd. “The pound is also well-supported by M&A-related flows following reports that ABInBev may submit a bid for SABMiller.”
Sterling appreciated 0.4 percent to 73.53 pence per euro as of 2:46 p.m. London time, its first gain in five days. It was little changed versus the dollar at $1.5174, after six days of declines. It slumped to $1.5136 at the end of last week, its lowest since May 5.
Petr Krpata, a London-based foreign-exchange strategist at ING Groep NV, also sees the BOE raising its 0.5 percent main rate by February. Forward contracts based on the sterling overnight index average, or Sonia, suggest a full quarter-point increase won’t come until after November 2016.
Hedge funds and other large speculators pushed net wagers on the pound rally to 1,267 contracts in the week ending Sept. 22, the first positive position since Aug. 25, according to the Commodity Futures Trading Commission in Washington.
Ten-year gilt yields fell three basis points, or 0.03 percentage point, to 1.81 percent. The 2 percent bond due in September 2025 rose 0.275, or 2.75 pounds per 1,000-pound face amount, to 101.725.