The pound strengthened to a three-month high against the euro as a report showed U.K. services expanded at the fastest pace since 2006 as companies reported a surge in demand.
Sterling climbed for a third day against the dollar after Markit Economics and the Chartered Institute of Purchasing and Supply said their U.K. services index, based on a survey of purchasing managers, rose to 60.5 last month from 60.2 in July as a gauge of new business rose to the highest in more than 16 years. U.K. government bonds were little changed as Bank of England policy makers start a two-day meeting today.
“The improvement in data in recent weeks has helped to support sterling as it has forced some to reduce their short positions,” said Henrik Gullberg, a currency strategist at Deutsche Bank AG in London, referring to bets the pound will weaken. “While we remain relatively bearish on sterling because of the country’s weak external position, positive data headlines will probably underpin the pound in the near term.”
The pound climbed 0.3 percent to 84.40 pence per euro as of 10:11 a.m. London time, the strongest level since May 17. It rose 0.3 percent to $1.5606.
The yield on 10-year gilts was at 2.88 percent, within two basis points of the highest level since Aug. 1, 2011, reached yesterday. The price of the 2.25 percent bond maturing in September 2023 was at 94.52.
The Bank of England’s nine-member Monetary Policy Committee will keep its asset-purchase target at 375 billion pounds tomorrow, according to all 38 economists in a Bloomberg survey. Officials will hold the main interest rate at a record-low 0.5 percent, a separate survey shows.
The pound strengthened 6.3 percent in the past six months, the best performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro gained 3.9 percent and the dollar climbed 2.6 percent.
Gilts lost 4.2 percent this year through yesterday, according to Bloomberg World Bond Indexes. German bonds dropped 2.6 percent and Treasuries declined 3.6 percent.
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