The pound advanced for a third day versus the dollar after a government report showed U.K. industrial production increased more in September than economists forecast.
Sterling climbed to the strongest in almost five weeks against the euro after separate data showed house prices climbed for the ninth month in October, adding to signs the recovery is gaining momentum. A gauge of whether British data is beating forecasts rose for the first time in almost two weeks. U.K. government bonds were little changed before the Bank of England announces a policy decision tomorrow.
“There’s capacity to push a bit higher against the dollar,” said Jane Foley, a London-based senior currency strategist at Rabobank International. “There’s so much good news in the price so it will be difficult to sustain gains much above $1.61.”
The pound gained 0.3 percent to $1.6101 at 11:28 a.m. London time, the first three-day advance since the period ended Oct. 2. The U.K. currency was little changed at 83.88 pence per euro after appreciating to 83.79 pence, the strongest level since Oct. 3.
Sterling has rallied 4.1 percent in the past six months, the best performer of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro climbed 3.9 percent and the dollar gained 0.1 percent.
Industrial output jumped 0.9 percent from August, when it fell 1.1 percent, the Office for National Statistics said. The median forecast of economists surveyed by Bloomberg News was for an increase of 0.6 percent. Home values climbed 0.7 percent, the biggest gain in three months, according to Halifax, the mortgage unit of Lloyds Banking Group Plc.
The Citigroup Economic Surprise Index for the U.K. rose to 19.1 from 14.2, the first increase since Oct. 23. The gauge, which shows whether data beat or fell short of economists forecasts, dropped to 14.2 on Nov. 4, the lowest since June 11.
The Bank of England will keep its key interest rate at a record-low 0.5 percent and its asset-purchase stimulus target at 375 billion pounds, according to Bloomberg surveys of economists before tomorrow’s announcement. Governor Mark Carney will present new quarterly forecasts on Nov. 13.
The central bank is likely to raise its 2013 GDP estimate toward 1.6 percent from 1.3 percent, Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London, wrote in a note to clients.
“The pound has outperformed,” Hardman wrote. “However with the first BOE rate hike still appearing some way off, the pound will still likely struggle to strengthen materially in the near term.”
The U.K. outlook has “improved substantially,” the European Commission said yesterday. The Brussels-based group said GDP will rise 1.3 percent this year and 2.2 percent next year, more than previously projected.
The benchmark 10-year gilt yield was at 2.72 percent after rising to 2.74 percent yesterday, the highest since Oct. 22. The price of the 2.25 percent bond due in September 2023 was 95.865.
Ten-year yields will climb to 2.90 percent by year-end, according to a Bloomberg survey of analysts. The median estimate has increased from 2.75 percent in September.
U.K. gilts lost 2.8 percent this year through yesterday, according to Bloomberg World Bond Indexes. Treasuries slid 2.4 percent and German securities declined 1.3 percent.
Chart: WorldWideMarkets Alpha Trader