gbp news

House Prices Propel Pound to 1.8600

Monday, 16 October 2006 08:44:57 GMT  |  Terri Belkas, Junior Currency Analyst

Cable rallied more than 70 points in late Asian/early London trading, as GBP/USD probed the 1.8600 level. Economic news out of the UK was encouraging, as Rightmove house prices jumped 2.0% in the month of October, bringing the annual rate to a 22-month high of 11.5%. Rightmove reported that the increase was driven by a lack in supply but noted that first time buyers are being priced out of the market to a larger extent. The release highlights that the outlook for higher interest rates has not yet curbed demand, but that increasing prices could cap demand. Other data set to post this week includes CPI, wage growth, and Q3 GDP, and all are estimated to weaken, creating a bearish bias for the week. The release of the minutes from the October Bank of England MPC meeting could save the currency, however, if the central bankers are leaning towards a more hawkish opinion. As of 8:40GMT, GBP/USD trades at 1.8606, up from Friday’s New York close of 1.8558.

London equities moved higher in opening exchanges on Monday, building on gains seen at the end of the previous week when the FTSE 100 reached its highest closing level in more than five-and-a-half years. The main index was 9.4 points, or 0.2% higher at 6,166.5. The the mid-cap FTSE 250 was slightly lower, but still above 10,000 level - down 6.3 points 0.1% at 10,393.3. In London, miners including BHP Billiton and Rio Tinto had a strong start after having led gainers in Asian trading overnight. BHP rose 1.9% to £10.18, while Rio was up 1.2% at £27.69 and Antofagasta was 1.5% higher at 505p. ITV led blue-chip gainers after Sir Peter Burt, chairman, told the Financial Times that he had no plans to step down. He said: “I have no intention of going until the board and I decide it is in the interests of shareholders that I go”. Shares in ITV rose 2% to 102¾p.  There were many financials in the bottom half of the index. Bradford & Bingley lost 1% to 472½p, Alliance & Leicester was down 0.7% to £11.35 and HBOS lost 0.6% to £10.91. EMI Group shares slipped 0.2% to 269½p after the music group said it expected a decline in total revenues of around 3% for the six months to September 30.  A profit warning from insurance group Benfield sent shares 11.1% lower to 336p. The company said it expected trading profit for the year to be around £10m below the level previously anticipated.

UK fixed income markets were little changed, with prices on 10-year gilts down slightly to 94.950 and yields steady at 4.642%.

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