Azernews.Az

By Bloomberg

The pound rose to the strongest level in two months against the euro as a report showed U.K. retail sales jumped in April, adding to speculation that inflation pressures are picking up in the British economy.

Sterling gained the most in almost two weeks versus the dollar after the Office for National Statistics said sales increased 1.2 percent from March. Economists surveyed by Bloomberg forecast a 0.4 percent increase. Minutes of the Bank of England’s May meeting published Wednesday showed officials predict economic slack probably will be eroded in a year.

The data “does suggest that the economy has got a reasonable healthy momentum behind it,” said Simon Derrick, chief markets strategist at Bank of New York Mellon Corp. in London. “Sterling still represents a healthy alternative to the euro zone and I think sterling continues to head higher.”

The pound appreciated for a fourth day versus the euro, gaining 0.6 percent on Thursday to 71.02 pence as of 1:03 p.m. London time, the strongest level since March 16. The U.K. currency rose 1 percent to $1.5683, set for the biggest daily gain since May 8.

Sterling has whipsawed against the dollar this week, dropping after data on May 19 showed Britain’s inflation rate fell below zero before rebounding on the BOE minutes a day later.

The retail-sales report “indicates how difficult the Bank of England’s job really is” as policy makers seek to balance strength in the domestic economy with external deflationary pressures, Bank of New York Mellon’s Derrick said.

Pound Forecasts

Barclays Plc revised its year-end forecasts for the pound, London-based strategists Hamish Pepper and Lynnden Branigan wrote in an e-mailed note Thursday. The bank sees the U.K. currency strengthening to 69 pence per euro, compared with an earlier prediction of 71 pence, and climbing to $1.42, after previously forecasting $1.38.

Citigroup Inc. recommended buying the pound against the euro at 71.31 pence, analysts including chief technical foreign- exchange strategist Tom Fitzpatrick wrote in a client note. They predicted a long-term move to 65 pence per euro.

U.K. government bonds were little changed after the nation sold 1.75 billion pounds of securities due in December 2030.

Benchmark U.K. 10-year gilts yielded 1.99 percent. The price of the 5 percent bond due in March 2025 was 126.70 percent of face value.

The U.K. sold the 15-year bonds at an average yield of 2.341 percent, down from 2.653 percent at a previous auction on Sept. 30.