London - The pound rose for a third day versus the dollar and reached the highest level this year as UK industrial production unexpectedly rose the most in six months.
Sterling has climbed about 2.7 percent against the US currency since Britain’s May 7 election. UK government bonds declined for a second day as a global rout in the fixed-income market extended.
“The pound is trading on firmer footing after the election risk premium was removed,” said Lee Hardman, a foreign-exchange strategist at Bank of Tokyo-Mitsubishi UFJ Ltd in London. “The UK economy still appears to expanding solidly, providing support for the pound. We expect the pound to continue to firm in the near term.”
The pound advanced 0.6 percent to $1.5674 at 10.21am London time, after touching $1.5676, the strongest level since December 19. Sterling weakened 0.3 percent to 71.82 pence per euro, after appreciating almost 4 percent in the previous three days.
Industrial output gained 0.5 percent in March from the previous month, the Office for National Statistics said in London on Tuesday. Economists surveyed by Bloomberg forecast no growth. Manufacturing rose 0.4 percent in the same period, exceeding the 0.3 percent estimate in a separate Bloomberg survey.
US 10-year Treasury yields climbed the most in three months on Monday, helping prompt a renewal of the selloff in global bonds.
The yield on benchmark 10-year gilts rose seven basis points, or 0.07 percentage point, to 2.01 percent. The 5 percent gilt due in March 2025 dropped 0.67, or 6.70 pounds per 1 000- pound face amount, to 126.48.
The pound weakened for the first time in four days against the euro on Tuesday as the single currency was supported by signs of progress in talks between Greece and its international creditors.
The Greek government also met its payment to the International Monetary Fund. The avoidance of a default boosted the common currency against most of its major peers. After a meeting of euro-area finance ministers on Monday, the group’s chair Jeroen Dijsselbloem said “we are making faster progress”. He added: “I’m not satisfied but just a bit more optimistic.”
Bloomberg