The pound appreciated for a seventh day versus the euro, extending the longest run of gains since September, as signs U.K. growth is accelerating pushed the currency to its strongest level in 19 months.
Sterling rose against 13 of its 16 major peers amid speculation the performance of Britain’s economy will prompt the Bank of England to bring forward plans to raise interest rates. Foreign-exchange options showed traders cut bets the pound would be weaker in a year’s time against the dollar to a five-year low. U.K. government bonds declined as the Debt Management Office auctioned 1.4 billion pounds ($2.4 billion) of inflation-linked gilts due in 2019.
“I feel that against the euro we will see 1.25 euros sooner rather than later in light of renewed focus on U.K. interest-rate hikes,” said Lee McDarby, executive director of U.K. corporate foreign-exchange sales at Nomura International in London. An exchange rate of 1.25 euros per pound is the equivalent of 80 pence per euro. “It will take an even bigger improvement in the outlook of the U.K. to allow the pound to break much outside the $1.66 to $1.70 range,” he said.