The pound rose to the strongest level in more than two years against the dollar after reports showed U.K. house prices and industrial production increased and the trade deficit narrowed.
Sterling extended gains into a third day versus the U.S. currency as the data added to signs Britain’s recovery is gaining traction. Bank of England Governor Mark Carney said the economy still needed policy support and pledged to maintain vigilance over the risk of a bubble in the housing market. U.K. government bonds rose along with Treasuries as stock declines spurred demand for safer assets.
“Sterling looks likely to continue to grind higher against the dollar, even if the dollar looks a little oversold,” said Jeremy Stretch, head of currency strategy at Canadian Imperial Bank of Commerce in London. “People will be continuing to talk about a break or a test of $1.65 in the short term, even though we’ve only just broken through $1.64.”
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