Pound Climbs to Four-Year High as Manufacturing Beats Forecasts

The pound climbed to the highest level in four years against the dollar as a gauge of U.K. manufacturing output rose more in April than analysts predicted, bolstering demand for Britain’s currency.

Sterling gained for a sixth day versus the greenback as a separate report showed U.K. annual house-price growth accelerated last month to the most since before the financial crisis. Bank of England policy maker Spencer Dale said to lawmakers yesterday that while he sees little evidence of the U.K. housing market overheating, officials “know we should be nervous about what’s going on.” U.K. government bonds rose for a second day.

“It’s another strong data point,” said John Hardy, the head of foreign-exchange strategy at Saxo Bank A/S in Copenhagen, referring to the manufacturing report. “We saw a breakout yesterday where sterling closed above those highest levels, finally getting clear of the $1.6820 area, so it’s open fields from here.”

The pound rose 0.2 percent to $1.6900 at 4:51 p.m. London time after climbing to $1.6920, the highest since August 2009. It gained 0.5 percent over the previous five days. Sterling appreciated 0.2 percent to 82.05 pence per euro.

An index of manufacturing output, based on a survey of purchasing managers, increased to 57.3 last month, the highest since November, from 55.8 in March, Markit Economics said. The median estimate of economists in a Bloomberg News survey was for a reading of 55.4. A level above 50 indicates expansion.

Housing Data

U.K. house prices increased 1.2 percent from March to 183,577 pounds, according to Nationwide Building Society. Home values jumped 10.9 percent from a year earlier, the biggest annual gain since June 2007.

Separate data showed mortgage approvals unexpectedly fell in March. Lenders granted 67,135 loans for house purchase, compared with downwardly revised 69,592 in February, the Bank of England said.

The pound has strengthened 5.7 percent in the past six months, the best performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes, amid signs Britain’s recovery will spur the Bank of England to raise borrowing costs sooner than it forecast. The euro gained 2 percent and the dollar lost 1.1 percent.

Benchmark 10-year gilt yields fell three basis points, or 0.03 percentage point, to 2.63 percent, with the 2.25 percent bond due in September 2023 climbing 0.245, or 2.45 pounds per 1,000-pound face amount, to 96.845.

Gilts returned 3.1 percent this year through yesterday, according to Bloomberg World Bond Indexes. German securities earned 3.2 percent and Treasuries gained 2.4 percent.

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