Sterling Up against the Euro after ECB Rate Cut

Tradervox.com (Dublin) - The sterling pound strengthened against the 17-nation currency for the second week after the European Central Bank unexpectedly lowered its benchmark interest rate, which boosted the demand for the UK currency. The pound strengthened to its strongest level since April. Sterling posted its first weekly advance in three weeks versus the dollar as reports showed British services growth unexpectedly accelerated in October to the fastest pace in 16 years and a gauge of house prices jumped to a record. U.K. government bonds declined for a second week as the Bank of England kept its key interest rate at a record low and maintained its bond-buying stimulus target.

According to Lee Hardman, a London-based currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd, the move in the pound is more euro-specific because the downtrend in the euro has accelerated. He added that the data in the UK continues to surprise to the upside, which is supportive for the UK currency.

The pound gained 1.4 percent to 83.52 pence per euro at the close of trading in London on Nov. 8, the biggest advance since the period ended April 26. It touched 83.01 pence on Nov. 7, the strongest level since Jan. 17. Sterling climbed 0.4 percent to $1.5995.

The ECB cut its main refinancing rate to 0.25 percent on Nov. 7 after a drop in inflation to the slowest pace in four years threatened its mission to keep prices stable. The Bank of England left its asset-purchase target at 375 billion pounds and the benchmark interest rate at a record-low 0.5 percent on the same day. The London-based central bank has said it will keep the rate low until unemployment, currently at 7.7 percent, falls below 7 percent.

The pound pared its weekly advance against the dollar on Nov. 8 after a U.S. report showed payrolls increased last month more than economists forecast.

A U.K. services industry gauge rose to 62.5 from 60.3 in September, the highest since May 1997, Markit Economics said on Nov. 5 in London. The median estimate in a survey of economists was for a reading of 60. House values in the U.K. increased 0.6 percent from September to an average 237,161 pounds, London-based real-estate researcher Acadametrics and LSL Property Services Plc (LSL) said on Friday Nov. 8.

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