Pound Rises Versus Euro as Gilts Fall After U.S. Payrolls Jump

The pound rose against the euro amid evidence Britain’s economy is withstanding the stagnation that may lead to more European Central Bank stimulus for its neighbors.

Chancellor of the Exchequer George Osborne upgraded the U.K.’s growth forecast for next year during his Dec. 3 Autumn Statement, a day before the ECB downgraded its forecasts for growth and inflation through 2016. Britain’s government bonds dropped with Treasuries after gains in U.S. payrolls exceeded the highest forecast in a Bloomberg News survey.

“Look at any of the data, employment is better, the PMIs are better” in the U.K., said Paul Bednarczyk, a currency strategist at 4Cast Ltd. in London. “Euro-sterling could easily over the next year or two hit below 70 pence,” he said.

The pound gained 0.1 percent to 78.87 pence per euro at 4:49 p.m. London time after touching 78.33 pence on Dec. 3, the strongest level since Nov. 12. The U.K. currency has appreciated 0.9 percent this week. Sterling dropped 0.5 percent to $1.5596, leaving it down 0.3 percent since Nov. 28.

The British economy will expand 3.2 percent this year, the most among the Group-of-Seven nations, the International Monetary Fund said in its latest World Economic Outlook released in October. The euro area economy will grow 0.8 percent, with Italy’s economy contracting, the IMF said.

Gilts Fall

The pound has gained 4.9 percent in the past year, the biggest advance after the dollar among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The greenback surged 11 percent, while the euro weakened 1.7 percent.

Benchmark 10-year gilt yields rose three basis points, or 0.03 percentage point, to 2.02 percent. The 2.75 percent bond due in September 2024 fell 0.275, or 2.75 pounds per 1,000-pound face amount, to 106.45. The rate has climbed nine basis points this week, the most since the period through Sept. 5.

Employers in the U.S. added 321,000 jobs in November, the most since January 2012, up from a 243,000 gain in October that was stronger than previously reported, the Labor Department said today in Washington.

Treasury 10-year note yields jumped nine basis points to 2.32 percent and touched 2.33 percent, the most since Nov. 24.

Markit Economics’ purchasing managers index for the services industry in the U.K. rose to 58.6 last month from 56.2 in October, the company said on Dec. 3, more than the 56.5 median estimate of analysts in a Bloomberg News survey. In the euro area, services and manufacturing grew less than initially estimated, a separate report showed the same day.

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