The pound rose to a four-year high against the dollar after data showed U.S economic growth stagnated while U.K. consumer confidence climbed, boosting the relative appeal of sterling.
The pound had its first monthly gain in three versus the euro amid signs Britain’s recovery will spur the Bank of England to raise borrowing costs sooner than it forecast. U.S. gross domestic product grew 0.1 percent in the first quarter, chilled by harsh winter weather. U.K. 10-year yields were at the highest in almost 16 years relative to similar-maturity German bunds as monetary policy diverges, with the threat of deflation fueling speculation the European Central Bank will boost stimulus.
“We’re very positive on sterling given the economic backdrop in the U.K.,” said Phyllis Papadavid, a senior global-currency strategist at BNP Paribas Corporate & Investment Banking in London. U.S. GDP “was a disappointment but it’s important to recognize that it is impacted by the weather and so far we’ve had positive indications on the U.S. for the second quarter.”
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