The pound reached the strongest in a week against the dollar before an industry report tomorrow that economists said will show retail sales increased in January, adding to evidence the recovery is gaining momentum.
The U.K. currency has risen against all except the Swiss franc among its 16 major counterparts in the past three months amid speculation an improving economy will prompt the Bank of England to raise interest rates sooner than it predicts. The central bank is due to release forecasts for economic growth and consumer prices in its quarterly Inflation Report on Wednesday. U.K. government bonds declined.
“We still have more upside potential for the pound, especially against the euro,” said Ulrich Leuchtmann, head of currency strategy at Commerzbank AG in Frankfurt. “If the Bank of England gives us an indication that there’s a good chance of them normalizing at some point, it may be far out, but if it’s clear enough that would be a strong message for sterling.”
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