Friday, 2 August 2013

Pound Jumps on U.K. Growth After Construction Data

By Eshe Nelson - Aug 2, 2013 8:00 PM GMT+0400
The pound rallied from a two-week low against the dollar as a gauge of construction output based on a survey of purchasing managers exceeded analyst forecasts, signaling Britain’s recovery is strengthening.
The U.K. currency rose for a second day versus the euro after the National Institute of Economic and Social Research said Britain’s economy will grow faster this year than previously predicted as consumers increase spending. The pound advanced against all 16 of its major currencies as U.S. data showed American employers added fewer jobs in July than economists estimated. Gilts fell for a third day.
Aug. 2 (Bloomberg) -- Jonathan Portes, director of the National Institute of Economic and Social Research, talks about the outlook for the U.K. economy, fiscal policy and banks. He speaks with Guy Johnson on Bloomberg Television's "The Pulse." (Source: Bloomberg)
Aug. 1 (Bloomberg) -- Nicole Elliott, chief technical strategist at, talks about the outlook for the U.S. dollar versus emerging market and European currencies, and Federal Reserve monetary policy. She speaks in London with Bloomberg's Niki O'Callaghan. (Source: Bloomberg)
“The global market will reassess where the U.K. economy is heading,” said Neil Jones, head of European hedge-fund sales at Mizuho Bank Ltd. in London. “The economy is in better shape and will be in better shape than we are currently giving credit for in foreign-exchange markets.”
The pound rose 1.1 percent to $1.5285 at 4:43 p.m. London time, gaining for the first time in six days. It earlier touched $1.5102, the least since July 17. The U.K. currency gained 0.5 percent to 86.88 pence per euro, strengthening for a second day.
An index of construction activity jumped to 57 for July, from 51 in June, Markit and the Chartered Institute of Purchasing and Supply in London said in a statement today. That’s the highest since June 2010. The median estimate of 13 economists in a Bloomberg News survey was for 51.5. A reading above 50 indicates expansion.

House Prices

U.K. house prices rose 0.8 percent in July, from 0.3 percent the previous month, Nationwide Building Society said. Values increased to an average 170,825 pounds, the most since June 2008. The nation’s gross domestic product will expand 1.2 percent this year and 1.8 percent in 2014, compared with forecasts in May of 0.9 percent and 1.5 percent respectively, Niesr said today.
U.S. nonfarm payrolls rose by 162,000 in July, less than the median estimate for 185,000 in a Bloomberg News survey of economists.
Gilts fell, pushing 10-year yields to a three-week high, as the economic data diminished demand for the safest U.K. government assets.
“The U.K. data is not constructive for gilts,” said Jason Simpson, a U.K. rates strategist at Banco Santander SA in London. “All the survey data for July rose and surprised on the upside giving further evidence that the economic recovery has legs and is gathering momentum.”

Gilt Yields

Yields on the 10-year gilt rose two basis points, or 0.02 percentage point, to 2.42 percent after rising to 2.49 percent, the highest since July 9. The price of the 1.75 percent bond due September 2022 dropped 0.16 or 1.60 pounds per 1,000-pound face amount, to 94.54. Two-year and 30-year gilt yields reached the highest levels since July 25, at 0.38 percent and 3.62 percent, respectively.
Gilts lost 5.2 percent in the past three months, according to Bloomberg World Bond Indexes, as economic data pointed to growing strength in the British and U.S. economies. Treasuries slid 4.2 percent and German bunds declined 2.1 percent.
Sterling has advanced 1 percent in the past three months, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies. The euro rose 4.7 percent and the dollar gained 2.8 percent.
To contact the reporter on this story: Eshe Nelson in London at
To contact the editor responsible for this story: Paul Dobson at