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Pound Strengthens to 4-Month High After Trade Deficit Shrinks

The pound rose to the strongest level in almost four months versus the dollar after a report showed the U.K. trade deficit shrank in July as exports soared, adding to signs the economy is emerging from recession.

Sterling advanced for the fourth time in five days before a labor market report tomorrow forecast to show the unemployment rate stayed at the lowest in over a year. The pound also gained as a Bank of England policy maker said the U.K. economy may be stronger than growth data indicate. Ten-year gilts were little changed after a sale of inflation-linked bonds.

“The trade numbers are surprisingly encouraging which has important implications for economic growth,” said Jeremy Stretch, head of foreign-exchange strategy at Canadian Imperial Bank of Commerce in London. “The pound may now have some more room to rally against the dollar.”

via Bloomberg [1]

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