Pound Climbs to 4-Year High on U.K.’s Resurgent Economic Growth

The pound advanced to the strongest level in more than four years against the dollar this week as signs the U.K. economic recovery is gathering momentum boosted the allure of British assets.

Sterling climbed for a fourth week versus the greenback as data showed growth accelerated in the first quarter and house prices rose at the fastest pace since 2007. The U.K. currency advanced against the euro as a purchasing managers index for manufacturing rose more than analysts forecast. Government bonds were little changed after Bank of England Governor Mark Carney said the recovery is starting to “broaden out” before the Monetary Policy Committee’s interest-rate decision on May 8.

The pound rose 0.4 percent this week to $1.6865 at 5:07 p.m. London time yesterday after rising to $1.6920 on May 1, the highest level since August 2009. The U.K. currency strengthened 0.2 percent since April 25 to 82.20 pence per euro.

Sterling has climbed 5.5 percent in the past six months, the best performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes, as the strengthening recovery fuels speculation the Bank of England will raise borrowing costs sooner than other central banks. The euro gained 2.1 percent and the dollar weakened 1 percent.

Adding to signs economic resurgence, a Markit Economics index will show growth in services output accelerated in April, according to the median forecast of analysts in a Bloomberg survey before the data is released on May 6. U.K. markets are closed for a public holiday on May 5.

Benchmark 10-year gilt yields were little changed on the week at 2.64 percent. The price of the 2.25 percent bond maturing in September 2023 was at 96.77.

Gilts returned 3.3 percent this year through May 1, according to Bloomberg World Bond Indexes. German securities earned 3.2 percent and U.S. Treasuries gained 2.6 percent.