The pound rose against the euro amid concern over European nations

The pound rose against the euro amid concern over European nations will have difficulty raising funds as the Confederation of British Industry said the Bank of England will start raising interest rates within six months.

Sterling strengthened against the single currency of 16 nations at the IWC issued its report and the data showed that mortgage lending in the UK rose for the first time in six months. Government bonds advanced, leaving the 10-year yield at least a week as the military exercises in South Korea and threats of retaliation by the North increased demand for the safety of fixed income assets.

"Sterling is benefiting from the work of diversification in the back of the concerns of the euro and I had come out and tell the CBI that the Bank of England would be to hike within six months," said Jane Foley, currency strategist Currency of Rabobank International in London. There was talk last week the rate is being carried forward, "so this is just to consolidate a new debate," said Foley.

The pound strengthened 0.3 percent against the euro at 84.62 pence per euro as of 2:20 pm in London. Was one percent, to $ 1.5552 from $ 1.5533 in New York last week.

The pound has lost 1.4 percent in the last week.

Since late 2009, the British currency has lost 5.3 percent, compared with a decline of 10 percent for the euro and a loss of 1 cent per dollar.

The Bank of England raised its benchmark interest rate a quarter point every three months from the second quarter of 2011 to mid 2012, based in London CBI predicted in a report released today. It then goes to step up the pace of increases at the end of this year with a 2.75 percent rate, the prognosis of CHF.

MPC decision

Minutes of the December Bank of England Monetary Policy Committee meeting, on 22 December, is likely to show members remained divided on its decision to keep key interest rate at a record low of 0.5 percent and have the asset purchase program at 200 billion pounds.

MPC member Adam Posen, who has asked the bank to increase the stimulus, said last week policy makers should not "overreact" to inflation. His colleague Andrew Sentance voted to increase rates since June.


The pound may fall to resume next year as a slowing economy prompts investors to withdraw bets on higher interest rates, Bank of Tokyo-Mitsubishi UFJ Ltd., said.

"The expectations to reverse '

"We doubt much to the Bank of England will be able to start raising its official bank rate over the next six months," wrote Derek Halpenny, European head of currency strategy in London, in a note to investors today. "The rate hike expectations tend to invest in during the first quarter to take the pound lower, too."

Gross mortgage lending fell 5 percent to 11.1 million pounds in November from the previous month, the Council of Mortgage Lenders said today. A separate report based on data from six lenders published by the Bank of England showed that banks granted 45,000 loans for home purchases last month, compared with 44,000 in October, the first rise in six months.

The 10-year gilt yield fell seven basis points to 3.49 percent. It was 3.65 percent on December 16, the highest since May 1920. Past performance declined to 3.485 percent today, at least since 13 December. The safety of 4.75 percent due in March 2020 rose 0.58, or 5.8 pounds per 1,000-pound face amount, to 109.87. The yield on the two years has changed little over 1.16 percent.

Gilts have returned 5.9 percent this year compared with a gain of 5.5 percent for German bonds, the reference values of the euro region, according to the compliance rates by  the Federation European Society of Financial Analysts. Treasuries have returned 5.7 percent, the indexes show.