Pound Surges Ahead Against USD

The UK gilts have seen decline with the 10-year yields jumping to the highest value in last 4 months. As the US lawmakers passed a legislation to avert the upcoming fiscal cliff, the demand of fixed income assets as a haven has also got decreased. Apart from that, the major currency of UK, the Pound also surged to its strongest level against the greenback in the last 16 months. The Pound actually is priced at $1.6381 and this marks its highest value since 30th August, 2011. Sterling, however, was more or less unchanged, if compared to Euro.

According to reports, United Kingdom’s growth expanded at the fastest rate in December within the last 15 months. Economists believe that the British economy has gained sort of strength while nearing end of last year, thereby the chances of another recession is slim now.

The Interest Rate Strategist of Banco Santander SA, Jason Simpson stated that the UK markets have depended on the US largely. He added that as the US policymakers have been able to resolve a good number of key fiscal problems, this is going to help not only the US, but the overall global economy as well.

The 10-year British yields went ahead by 16 basis points and are at 1.99% currently. This marks its biggest increase since 3rd September. On the other hand, the 1.75% security plummeted by 1.39 and is set at 97.92 now. 2-year UK yields also saw surge of 8 basis points and is at 0.40% currently recording its highest value since 16th May. According to initial estimates, the 10-year yields are expected to jump to 2.90% in 2013.

A gauge denoting the British factory activity increased to 51.4 in December, from 49.2 of that of November. The initial expectation was of 49.1, but, as the gauge has jumped above 50, the industry seems to have grown well in the meantime.

The construction industry of UK has also seen improvements in December and a report suggesting the same is expected to come out within this week. The Purchasing Manager’s Index for the country has also been able to get over the 3-month low figure of 47.3, experienced in October.

According to the Departmental Head of European Hedge Fund Sales of Mizuho Corporate Bank Ltd., Neil Jones, the Pound is all set to benefit further, if the global backdrop gets better.