BLBG: British Pound Snaps Three-Day Losing Streak as Stocks Advance
By Keith Jenkins
Dec. 24 (Bloomberg) -- The pound rose against the dollar and U.K. government bonds fell amid signs the global economy is recovering and as stock markets advanced.
The gains for the British currency snapped a three-day losing streak versus the dollar as the FTSE 100 Index climbed for a fourth day. The Confederation of British Industry raised its 2010 economic growth forecast for the U.K. three days ago and said the Bank of England may pause its bond-purchase plan in February. Britain must hold a general election by June 2010.
“Sterling can strengthen into the upcoming U.K. elections,” Brian Kim, a currency strategist at UBS AG in Stamford, Connecticut, wrote in a research note. “But caution thereafter as we could see sterling weaken due to fiscal spending cut-backs.”
The pound gained to $1.6004 as of 12:20 p.m. in London, from $1.5957 yesterday. It depreciated against the euro for a fourth day, trading at 90 pence per euro, from 89.85 pence yesterday.
The British government had a 20.3 billion-pound ($33 billion) budget deficit in November, the largest since records began in 1993, pushing national debt above 60 percent of gross domestic product. The shortfall was up from 15.5 billion pounds a year earlier, according to data released by the Office for National Statistics on Dec. 18.
Sterling, which has risen 9.5 percent versus the dollar this year, dropped to $1.5922 two days ago, its lowest level since Oct. 14.
The U.K. currency was buoyed as declines for gilts drove the yield on the 10-year note to 4.028 percent, its highest level in six months. The yield rose above 4 percent yesterday for the first time since July.
The FTSE 100 Index of U.K. shares advanced 0.6 percent today, climbing to the highest level since before the collapse of Lehman Brothers Holdings Inc. in September 2008.
To contact the reporter on this story: Keith Jenkins in London at Kjenkins3@bloomberg.net
