The pound strengthened to a 10-week high against the dollar as an industry report showed U.K. house prices increased this month, boosting optimism the recovery is gathering momentum.
Sterling gained for a fourth day versus the U.S. currency after a government report last week showed Britain’s economy avoided a recession last quarter, damping speculation the Bank of England will boost stimulus. U.K. government bonds rose as Germany’s inflation rate slumped. Slower inflation enhances the value of the fixed payments from government securities.
“Investors have been very downbeat on their expectations of the U.K. economic performance so the recent data has been a surprise to the upside,” said Neil Jones, head of hedge-fund sales at Mizuho Corporate Bank Ltd. in London. “There was a lot of anti-sterling sentiment. The data is proving to be slightly better than expected.”