Pound Gains as Carney Sees No Case for QE, Confidence Improves
The pound rose against the dollar for a fourth week, the longest streak in a year, as Bank of England Governor Mark Carney said he sees no case for further stimulus measures that typically debase the currency.
Sterling strengthened versus all but one of its 16 major peers as a gauge of U.K. consumer confidence climbed to the highest in almost six years in September and house prices rose for a fifth month. Carney told the Yorkshire Post the central bank would consider expanding its bond purchases, known as quantitative easing, only if the economy faltered. U.K. government bonds advanced, posting their biggest weekly gain since March.
“The pound’s recent strength is pretty much on the back of stronger economic data and comments from Carney,” said Ian Stannard, head of European currency strategy at Morgan Stanley in London. “Our view on the pound remains bearish given its vulnerable external position, but in the near term sterling may continue to enjoy some support from data surprises.”
The pound gained 0.8 percent from last week to $1.6133 at 4:55 p.m. London time yesterday after climbing to $1.6163 on Sept. 18, the highest since Jan. 11. The four-week gain is the longest since the period ended Sept. 21, 2012. Sterling strengthened 0.7 percent to 83.92 pence per euro after appreciating to 83.53 pence on Sept. 18, the strongest since Jan. 17.
GfK NOP Ltd.’s consumer-sentiment index rose to minus 10 this month, the highest since November 2007, from minus 13 in August, the London-based group said yesterday. U.K. house prices increased 0.9 percent after climbing an upwardly revised 0.7 percent in August, according to Nationwide Building Society.
“My personal view is, given the recovery has strengthened and broadened, I don’t see a case for quantitative easing and I have not supported it,” Carney said in an interview with the Yorkshire Post published on its website yesterday.
The Debt Management Office is scheduled to auction 4 billion pounds of 10-year gilts on Oct. 3. The U.K. last sold the benchmark securities on Sept. 12 at an average yield of 2.976 percent, the highest since June 2011.
U.K. manufacturing expanded further in September, a report next week is forecast to show. Markit and the Chartered Institute of Purchasing and Supply will say on Sept. 30 that their gauge of factory activity increased to 57.5 from 57.2 in August, according to the median estimate of 23 analysts surveyed by Bloomberg News. A reading above 50 indicates expansion.
The pound has risen 6.8 percent in the past six months, the best performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro appreciated 6 percent, while the dollar weakened 0.6 percent.
The yield on benchmark 10-year gilt dropped 21 basis points from last week to 2.71 percent, the steepest decline since the period ended March 1. The rate touched 2.70 percent yesterday, the least since Aug. 27. The 2.25 percent bond due in September 2023 rose 1.8, or 18 pounds per 1,000-pound face amount, to 96.035.
U.K. gilts lost 3.3 percent this year through Sept. 26, according to Bloomberg World Bond Indexes. German securities fell 1.7 percent and Treasuries declined 2.5 percent.