Pound Advances Versus Dollar After Industrial Output Surprise

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The pound jumped against the dollar by the most in a week as data showed industrial production expanded more than economists forecast.

Sterling’s volatility against the dollar surged to the highest level in almost a month, after a report released by the Office of National Statistics showed industrial output beat analyst estimates, even as factory output unexpectedly contracted. Sterling climbed against the euro by the most since May. Bank of England Governor Mark Carney said potential market volatility has increased, in the text of his annual Mansion House speech published Wednesday before he delivers it.

“The industrial production figures are more important than manufacturing and I think sterling strength could last,” said Lutz Karpowitz, a senior currency strategist at Commerzbank AG in Frankfurt.

Sterling rose 0.7 percent to $1.5495 at 5:45 p.m. London time. One-week volatility for the pound versus the dollar advanced 0.45 percentage point to 9.51 percent, and earlier touched 9.83 percent, the most since May 11. The pound appreciated 0.6 percent to 72.87 pence per euro, recovering from 73.89 pence on Tuesday, its weakest level since May 8.

In reports Wednesday, industrial production for April rose 0.4 percent from the previous month, and climbed 1.2 percent from a year earlier, beating analyst estimates of 0.1 percent and 0.6 percent respectively. Manufacturing data fell short of forecasts.

Mansion House

Benchmark 10-year government bond yields rose three basis points, or 0.03 percentage point, to 2.13 percent. The 5 percent gilt due in March 2025 fell 0.31, or 3.10 pounds per 1,000-pound face amount, to 125.135.

The Mansion House dinner is an annual event that traditionally captures the attention of traders and investors because it’s addressed by the BOE governor and Chancellor of the Exchequer, or the finance minister, and attended by leading bankers. Carney and George Osborne are scheduled to speak at 9 p.m. London time.

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