The pound climbed to an 11-week high versus the dollar after a report showed U.K. manufacturing shrank less than economists predicted last month, weakening the case for more central-bank stimulus that debases the currency.
Sterling strengthened against 11 of its 16 major peers. A gauge of factory output rose to 49.8 from a revised 48.6 in March, Markit and the Chartered Institute of Purchasing and Supply said in London. Economists had forecast a reading of 48.5, according to the median of 28 estimates in a Bloomberg News survey. U.K. house prices were little changed in April, Nationwide Building Society said today. Government bonds were little changed, reversing an earlier decline.
“It was a better reading than anticipated and it continues the theme of a slight improvement,” said Jeremy Stretch, head of currency strategy at Canadian Imperial Bank of Commerce in London. “Over the course of the last few sessions we have been grinding higher in sterling. For now, it’s a more constructive backdrop.”
The pound gained 0.3 percent to $1.5583 at 2 p.m. London time, after climbing to $1.5596, the highest since Feb. 13. It appreciated for a sixth day against the U.S. currency, the longest run of gains since the period through April 27, 2012. Sterling weakened 0.1 percent to 84.88 pence per euro. It appreciated to 83.98 pence on April 26, the strongest level since Jan. 24.
Britain’s currency has gained 1.3 percent in the past month, according to Bloomberg Correlation-Weighted Indexes that track 10 developed-nation currencies. The pound jumped above its 100-day moving average against the dollar for the first time since Jan. 16. It’s still down 3.1 percent this year, the indexes show.
Sterling has pared its decline this year as reports fueled optimism that the economy is on a path to recovery. Gross domestic product increased 0.3 percent in the first three months of the year, exceeding economists’ forecasts, data from the Office for National Statistics showed last week.
A Bank of England report yesterday showed U.K. lenders granted more loans for homes in March than analysts predicted, adding to signs the economy is improving.
The Bank of England’s Monetary Policy Committee next meets on May 8-9. Governor Mervyn King has wanted to expand the central bank’s 375 billion-pound asset purchase program, or quantitative easing, for three consecutive months but has been outvoted by a majority on the nine-member policy committee, minutes of their meetings show.
The 10-year gilt yielded 1.68 percent, after earlier climbing to 1.71 percent. The price of the 1.75 percent bond due in September 2022 was at 100.65.
Gilts returned 1.1 percent this year through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bonds rose 1 percent and U.S. Treasuries earned 0.9 percent.
To contact the reporter on this story: Lukanyo Mnyanda in Edinburgh at firstname.lastname@example.org