Pound Strengthens

Written by forexwatch on 19 May 2009

Pound Strengthens

May 18 (Bloomberg) — The pound rose against the euro and the dollar after an industry report showed U.K. home sellers raised asking prices in May by the most in more than a year.

The Pound appreciated to 88.24 pence per Euro from 88.93 pence on May 15. It also rose to $1.5281 from $1.5180.

The Pound climbed for the third day as signs the worst of the recession may be over sent the FTSE 100 Index 1.9 percent higher, its biggest gain in more than two weeks.

We see further gains ahead for sterling, especially against the euro. Investors have focused on the signs of stabilization emerging from the U.K. economy.

Gareth Berry, an analyst in London at UBS AG.

Home Prices

The average cost of a home climbed 2.4 percent from April.

Rightmove Plc.

The evidence Europe’s second-largest economy is recovering from its deepest slump in three decades. It was the largest increase since February 2008.
The Pound dropped by 20 percent in the past year made Britain the first choice of buyers of property market

Weaker sterling makes U.K. property more attractive. The U.K. property market is a screaming buy compared to rivals in continental Europe.

Turner said. Neil Turner, the Wiesbaden, Germany-based executive in charge of the money manager’s new 300 million-euro property fund.

Gilts Advance

Gilts rose as the Bank of England bought 3.5 billion Pounds ($5.4 billion) of gilts. The central bank said May 7 it will expand its asset-purchase program to 125 billion Pounds from 75 billion pounds to spur growth and fight deflation.

Former U.K. finance minister Norman Lamont, who drew criticism during the 1990s recession for announcing the “green shoots” of recovery, said he wouldn’t use the phrase again now because the banking system remains broken.

There are some optimistic signs but I wouldn’t call them green shoots

Lamont said today at the Banking Outlook 2009 Conference in London.

The rate of decline in the economy is decelerating. For a recovery, the first thing that has to happen is, you stop falling.

The yield on the 10-year gilt fell six basis points to 3.48 percent. The two-year note yield slipped six basis points to 1 percent. Bond yields move inversely to prices.

Gilts advanced as the Bank of England bought government bonds maturing in 10 to 25 years as part its drive to lower borrowing costs.

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