Whatever the justification is, selling BP stock and covering GBP in turn, or the AIG/Pru brawl (same rationale - see below)... pound still on the move?
Sterling rises broadly on collapse of Pru/AIG deal
* Sterling rises broadly as Pru/AIG deal aborted
* Pound at 18-mth high vs euro, 4-month trade-weighted high
* Analysts eye further gains as market chases the move
LONDON, June 2 (Reuters) - Sterling rose broadly on
Wednesday as the collapse of Prudential's attempt to buy AIG's
Asian arm prompted unwinding of currency hedges put in place in
anticipation of a deal.
British insurer Prudential plc <PRU.L> is withdrawing from
a $35.5 billion deal to buy American International Group Inc's
<AIG.N> Asian life insurance business AIA. [ID:nTOE65100R]
Sterling rose broadly on Tuesday on growing
anticipation the deal was close to collapse.
"The Prudential-AIG deal is not going to happen and I would
expect sterling to remain bid as the market chases this move,"
said Daragh Maher, deputy head of global FX research at Credit
Agricole CIB.
Traders said Prudential had put in place a series of
currency hedges, selling sterling against the dollar, when the
initial bid was announced in March and these positions would
need to be unwound.
"Sterling is still benefiting from the Prudential situation
today," a London-based spot trader said.
At 0735 GMT, sterling was up around 0.7 percent versus the
dollar <GBP=D4> at $1.4755, having risen more than 1 percent on
Tuesday to a high of $1.4723. Traders noted good demand for
$1.4805 overnight sterling calls in the options market.
Versus the euro <EURGBP=D4>, sterling extended 18-month
highs to 82.80 pence. Traders said there were significant
stop-loss orders building underneath that level.
"There's been a shift in the technical complexion for
sterling versus the euro and that should be quite supportive,"
added Credit Agricole CIB's Maher.
Sterling rose to a four-month high versus a currency basket
<=GBP> at 80.80, according to Bank of England data.
UK data scheduled for release at 0830 GMT includes BOE
consumer credit figures for April, seen easing slightly to
stg0.3bn in a Reuters poll.
UK April money supply and mortgage approvals/lending figures
are also due.
"The macro data today will probably have little bearing on
sterling's price action, which remains bid on expectations the
currency hedge on the Pru-AIA deal will need to be unwound," RBC
analysts said in a note.
((neal.armstrong@thomsonreuters.com; Reuters Messaging:
neal.armstrong.reuters.com@reuters.net; +44-207-542-0876,
editing by Nigel Stephenson))
Keywords: MARKETS STERLING/OPEN |
