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Wednesday, 26 February 2014
Pound Holds Two-Day Advance Against Dollar After Economy Expands
By Eshe NelsonFeb 26, 2014 1:51 AM PT
The pound held a two-day advance versus the dollar after a report showed the U.K. economy grew in the fourth quarter, matching economist estimates.
Sterling was little changed against the euro. U.K. gross domestic product expanded 0.7 percent in the three months through December, after growing 0.8 percent in the third quarter, the Office for National Statistics said. Bank of England Chief Economist Spencer Dalesaid policy makers have no plans to increase interest rates soon. U.K. government bonds were also little changed.
“We would need a massive economic disappointment or strong dovish signal from the Bank of England to really bring down sterling, so any dips will be bought into,” said Valentin Marinov, head of European Group-of-10 currency strategy at Citigroup Inc. in London. “The fundamentals remain supportive.”
The pound was little changed at $1.6688 as of 9:48 a.m. London time after rising to $1.6727 yesterday, the highest since Feb. 19. Sterling was at 82.39 pence per euro.
Dale told Radio Ulster that he doesn’t know when U.K. borrowing costs might rise and that increases will be gradual.
“When interest rates do go up, it’s more likely than not to be a very gradual series of increases,” fellow policy maker David Miles said in a BBC television interview. “It may be that sometime next year may be the right time” to raise rates “but it’s difficult to predict,” he said.
The pound has gained 13 percent in the past year, the best performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro appreciated 6.8 percent and the dollar rose 0.9 percent.
The benchmark 10-year gilt yielded 2.75 percent. The price of the 2.25 percent bond due September 2023 was at 95.855.
U.K. government bonds returned 2.1 percent this year through yesterday, according to Bloomberg World Bond Indexes. German securities earned 2 percent and U.S. Treasuries gained 1.8 percent.