Pound Gains Versus Dollar on Speculation U.K. Growth Expanded

The pound rose for a fourth day against the dollar before data due next week, which economists said will show U.K. gross domestic product rose at a faster pace in the second quarter.

Sterling has gained versus most of its 16 major peers since minutes of the Bank of England’s latest meeting showed policy makers voted unanimously against expanding stimulus in favor of a strategy including forward guidance on interest rates. The economy grew 0.6 percent in the three months to June, compared with a 0.3 percent expansion in the previous quarter, according to the median of 36 estimates in a Bloomberg News survey. The figures will be released on July 25. Gilts fell.

“The pound is being supported by evidence that the economic recovery is gaining traction,” said Eimear Daly, head of market analysis at Monex Europe Ltd. in London. “The market consensus is that the GDP data next week will support that view. It’s likely the data may surprise on the upside.”

The pound climbed 0.2 percent to $1.5257 at 4:22 p.m. London time, extending this week’s advance to 1 percent. Sterling was little changed at 86.13 pence per euro. It has strengthened 0.4 percent since July 12.

The pound has jumped 2.2 percent in the past three months, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies. The dollar rose 2.1 percent and the euro climbed 2.8 percent.

Gilts Drop

Gilts declined, trimming a second weekly advance, as a report showed Britain’s budget deficit widened in June from a year earlier.

Net borrowing excluding temporary support for banks was 12.4 billion pounds compared with 11.9 billion pounds a year earlier, the Office for National Statistics said in London today. The figures exclude 3.9 billion pounds of coupon cash received from the Bank of England on its holdings of gilts.

“There looks to be less room for optimism on early progress with the deficit in this fiscal year than there was after last month’s figures,” wrote Sam Hill, a fixed-income strategist at Royal Bank of Canada in London.

The benchmark 10-year yield increased three basis points, or 0.03 percentage point, to 2.29 percent. The rate has declined four basis points this week. The 1.75 percent bond due September 2022 dropped 0.24, or 2.40 pounds per 1,000-pound face amount, to 95.6. Two-year yields climbed four basis points to 0.33 percent, a three basis-point drop since July 12.

Gilts handed investors a 2.2 percent loss this year through yesterday, according to Bloomberg World Bond Indexes. German bonds declined 0.6 percent and Treasuries fell 2.6 percent.

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