Pound Rises Against Dollar as Report Shows Insolvencies Declined

The pound rose for the first time in three days against the dollar after an industry report showed the number of U.K. business insolvencies fell in September, boosting optimism the economic recovery is strengthening.
Government bonds fell, pushing 10-year yields toward the highest in a month. The U.K. exited a recession in the third quarter, with gross domestic product increasing 0.6 percent from the previous three months, data due for release on Oct. 25 will show, according to the median forecast of economists in a Bloomberg News survey. Retail sales rose more than analysts estimated in September, a report last week showed.

Oct. 22 (Bloomberg) -- Elsa Lignos, a senior currency strategist at Royal Bank of Canada, talks about her foreign-exchange strategy. She speaks from London with Francine Lacqua on Bloomberg Television's "The Pulse." (Source: Bloomberg)

“The recent data have been relatively supportive for the pound, showing there is a bottoming out of the economic cycle,” said Ulrich Leuchtmann, head of currency strategy at Commerzbank AG in Frankfurt. “GDP is the release this week that has the potential to move the market because it will spur speculation about what the Bank of England might do.”
The pound appreciated 0.2 percent to $1.6034 at 11:44 a.m. London time, after declining 0.4 percent last week. Sterling slipped 0.2 percent to 81.50 pence per euro. It touched 81.51 pence, the weakest level since June 15.
Insolvencies dropped 3.1 percent from a year earlier to 1,679 companies, affecting 0.08 percent of all businesses, data from Dublin-based Experian Plc (EXPN) showed. Bankruptcies at U.K. companies with 26 to 50 employees fell 16 percent to 92 firms.
The pound will probably drop to $1.57 within a year, Leuchtmann predicted.

Gilts Slide

Sterling slid 1 percent in the past three months, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-market currencies. The euro gained 4.2 percent and the dollar dropped 3.9 percent.
The 10-year gilt yield rose three basis points, or 0.03 percentage point, to 1.91 percent after climbing to 1.96 percent Oct. 18, the highest since Sept. 17.
The additional yield, or spread, investors demand to hold U.K. 10-year gilts rather than similar-maturity German bunds widened to 30 basis points, the most since July, based on closing-market rates.
Gilts have handed investors a return of 2 percent this year through Oct. 19, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bonds gained 2.5 percent, the indexes show, while Treasuries returned 1.7 percent.


Source: Bloomberg

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