Sterling edged up to 1.5372 US Dollars this morning, close to a 7-week high. The Pound also recorded a modest advance against the Euro following the sale of UK bonds worth 1.6 billion Pounds.
The Pound Sterling Exchange Rate was in the region of 1.5388 against the US Dollar as of 12:15 pm GMT
After the Debt Management Office sold 1.6 billion Pounds of inflation-linked gilts maturing in 2024, an index of annual inflation expectations for the UK achieved its strongest level for over 4 ½ years. The 10-year break-even rate briefly achieved 3.39 before moving to 3.38.
Sterling, which is beginning to break away from the losing streak which has dogged it since the beginning of the year, has benefited from several factors today.
Firstly, appetite for riskier currencies like the Pound has been supported by the Bank of Japan’s decision to double bond buying in an unprecedented stimulus push.
Secondly, sentiment received an additional boost this morning after Chinese data revealed a significant increase in bank lending in March, an indication of China’s domestic economy strengthening.
Meanwhile, the publication of minutes from the latest Federal Open Market Committee policy meeting triggered far less market movement than usual. The minutes, which were released earlier-than-planned yesterday, revealed a deepening split among committee members regarding fiscal policy. However, since the minutes were taken on 19-20th of March several pieces of disappointing US data (such as last Friday’s non-farm payrolls report) have changed circumstances, invalidating some of the FOMC’s comments.
Next week investors will be looking to UK data, including Tuesday’s CPI and PPI figures, Wednesday’s employment data and Thursday’s retail sales statistics. Further indications that the UK sidestepped contraction in the first quarter of 2013 (thereby avoiding an unprecedented triple-dip recession) could result in a broadly stronger Pound.
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