GBP/USD above 1.6350 as Bonds Fall

U.K. government bonds fell for a second day after retail sales returned to growth in November, adding to evidence the economic recovery is gaining pace and reducing demand for safer assets.

Two-year yields climbed the most in six weeks after the Federal Reserve said yesterday it would slow its stimulus program that has helped put downward pressure on borrowing costs around the world. The pound rose against all but four of its 16 major peers. It jumped the most in two years versus the euro yesterday when a report showed the U.K.’s jobless rate declined.

“The key to U.K. data is that it’s corroboration and across the board you’re seeing the strength continue,” said Simon Peck, a fixed-income strategist at Royal Bank of Scotland Group Plc in London. “That suggests there are further upside risks to growth in 2014. The market is very vulnerable to the data strength continuing,” he said, referring to gilts.

Bloomberg

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