BLBG: Pound Gains as Central Bank Prepares for Bond-Buying Assessment
By Lukanyo Mnyanda
Jan. 15 (Bloomberg) -- The pound rose against the euro, headed for its biggest weekly gain since October, on speculation the Bank of England will allow its bond-buying program to expire as the economic recovery takes shape.
The currency also headed for a weekly gain against the dollar after the Guardian newspaper cited two days ago Bank of England policy maker Andrew Sentance as saying the bank will adopt a “wait-and-see” approach to review the effectiveness of its quantitative easing program. A report next week may show the inflation rate accelerated last month to above the central bank’s 2 percent target for the first time since May, according to economists in a Bloomberg survey.
“The pound has been rallying in the second half of the week, as the market has taken on board Sentance’s comments on quantitative easing,” said Jeremy Stretch, a senior currency strategist at Rabobank International. “People are starting to come to the realization that quantitative easing has come to the end of the road and that’s providing the pound with traction.”
Sterling strengthened 0.6 percent to 88.24 pence per euro as of 9 a.m. in London, pushing its advance since Jan. 8 to 1.9 percent. That would be the biggest weekly gain since the period through Oct. 30. It was little changed at $1.6327, leaving it also 1.9 percent stronger on the week.
‘Global Influences’
Bank of England policy makers have to consider raising rates as “there are global influences such as oil and commodity prices and the impact of the exchange rate, which can lead to speed limits for the rate of growth,” the Guardian quoted Sentance as saying in an interview published on Jan. 13
The central bank has cut its benchmark rate to a record low and is buying 200 billion pounds of bonds to keep borrowing costs depressed as it seeks to haul the economy out of its worst slump since at least 1955, when records began. The central bank will complete the final 25 billion pounds of its program by its next policy decision on Feb. 4.
Consumer prices probably increased 2.5 percent in December from a year earlier, the Office for National Statistics will say in London on Jan. 19, according to the median forecast of 15 economists in a Bloomberg News survey. The bank’s inflation target of 2 percent hasn’t been breached since May, when it was 2.2 percent.
