Pound Rises to 4-Year High

This week the Pound Sterling rose to the highest level in over 4 years against the greenback as indications that the British economy is recovering increased the attraction of British assets.

Pound increased for a 4th week against the dollar as house prices increased at the fastest rate since 2007 and data indicated that growth gained momentum in the 1st quarter. The pound advanced against euro too because a purchasing managers index for manufacturing increased more than expected by analysts.

Monetary Policy Committee will decide the interest-rate on May 8. Government bonds changed little after Bank of England Governor said that the recovery is beginning to “broaden out”.

This week the pound rose 0.4% to $1.6865 on May 2 after rising to the highest level of $1.6920 since August 2009 on May 1.

In the past six months, Sterling has risen 5.5%, the best performer among 10 developed-nation currencies. The strengthening recovery stimulates rumor that the Bank of England will increase borrowing costs sooner as compared to other central banks.

Stronger Confidence

Markets are optimistic on sterling. In the week, Benchmark 10-year gilt yields were slightly changed at 2.64%. The 2.25% bond maturing in September 2023 was at 96.77.

This year through May 1, Gilts returned 3.3%. U.S. Treasuries gained 2.6 percent and German securities earned 3.2%.