The UK pound traded 0.6 percent close to the highest level in five years against the dollar on speculation that the slowdown in the property market won’t prompt the Bank of England to raise interest rates.
The sterling remained slightly unchanged at $1.7079 in midday trading in London. It had earlier touched $1.7192 last week, its strongest level since October 2008. The pound traded at 79.19 pence per euro after earlier rising to 78.89 on July 17, its highest level since September 2012.
“Little has changed in terms of the structural direction and there should be further pound strength ahead,” Neil Jones, a London-based head of hedge-fund sales at Mizuho Bank Ltd told Bloomberg. “There is some profit taking on long sterling positions, some of the housing data may be coming in a little bit on the lighter side given the previous performance. But there’s more to come, there’s an underlying bid to the pound.”
The U.K. currency remained steady against the euro after Rightmove Plc announced that home prices in England and Wales declined in July, the first time to do so in 2014. Right move reported that house prices retreated 0.8 percent this month, compared to a 0.1 percent a month earlier.
Intense speculation that the Bank of England Governor Mark Carney may increase interest rates in the first half of next year has made the pound the best-performing currency among 10 major currencies. The sterling has gained 11 percent over the past year, while the dollar has plunged 2 percent and the euro rallied 1.2 percent.
The yield on the target 10-year UK government bonds rose 0.02 percentage point, or two basis points, to 2.59 percent. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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