Pound Trades Near 3-Month High Against Dollar Before BOE Report

By Paul Dobson

Nov. 11 (Bloomberg) -- The pound traded near a three-month high against the dollar before the Bank of England gives its quarterly inflation update and a report that economists predict will show the pace of claims for jobless benefits slowed.

Sterling was little changed versus the yen. Policy makers may say inflation will be roughly at their target rate of 2 percent in two years’ time, according to UBS AG. The Office for National Statistics will say people claiming unemployment benefits rose by 20,000 in October, the slowest rate since May 2008, according to the median estimate of 28 economists in a Bloomberg survey.

“The Monetary Policy Committee will indicate early rate hikes are unlikely, and also leave the door open for more quantitative easing if necessary,” Gareth Berry, a strategist at the bank in Singapore, wrote today in a report. “With the Bank of England’s policy view having stabilized for now, we think downside for sterling based on policy differentials alone is limited.”

The pound was at $1.6758 as of 8:32 a.m. in London, from $1.6744 yesterday, and traded at 150.54 yen, from 150.38 yen. The U.K. currency weakened to 89.70 pence per euro, from 89.54 pence.

Bank of England Governor Mervyn King is unlikely to seek rate increases in the next year as the longest recession on record keeps inflation in check, former Chancellor of the Exchequer Kenneth Clarke said.

“The governor of the bank is going to face an absolutely crucial decision,” Clarke told reporters at a lunch in London yesterday. “I don’t think he’s likely to want to put up interest rates in the next 12 months.”

The yield on the 10-year U.K. government bond rose 2 basis points to 3.81 percent, and the two-year security’s yield also increased 2 basis points, to 0.79 percent.

To contact the reporter on this story: Paul Dobson in London at pdobson2@bloomberg.net