British pound heading toward seven-month high versus euro as UK official says region's economy is in early stages of recovery; pound has risen 7.4% against euro in past six months

Cindy Allen

Cindy Allen

Sep 9, 2013 – bloomberg

LONDON , September 9, 2013 () – The pound strengthened toward a seven-month high versus the euro as U.K. Chancellor of the Exchequer George Osborne said Britain’s economy is turning a corner and is in the early stages of a recovery.

Sterling advanced for a second day versus the dollar before a report on Sept. 11 economists said will show U.K. jobless claims fell last month. Unemployment held at 7.8 percent in July, according to a separate Bloomberg survey, above the Bank of England’s 7 percent threshold for assessing interest rates. Gilts fell before the Debt Management Office sells as much as 6.5 billion pounds ($10.2 billion) of debt due in 2023 and 2044 this week.

“I am optimistic about sterling,” said Steve Barrow, the head of Group-of-10 research at Standard Bank Plc in London. “The habit has been for U.K. data to come out stronger than expectations and so you are more likely to run with a position in the currency. The momentum is with employment.”

The pound strengthened 0.2 percent to 84.18 pence per euro at 11:58 a.m. London time, after appreciating to 83.92 pence on Sept. 6, the strongest level since Jan. 24. It has climbed versus the 17-nation shared currency on eight of the past nine trading days. Sterling advanced 0.3 percent to $1.5672.

The U.K. currency has risen 7.4 percent in the past six months, the best performer among 10 major currencies tracked by Bloomberg Correlation-Weighted Indexes, amid optimism U.K. growth is accelerating. The dollar gained 1.7 percent and the euro advanced 3.4 percent.

‘Early Stages’

“These are still the early stages of recovery,” Osborne said today in London. “Avoiding an unintentional and premature tightening of financial conditions,” while “staying the course with our deficit-reduction plan” will help counter domestic risks to growth.

Osborne’s comments come a month after Bank of England Governor Mark Carney signaled interest rates won’t rise before late 2016.

Benchmark 10-year gilt yields rose two basis points, or 0.02 percentage point, to 2.95 percent, after climbing to 3.01 percent on Sept. 5, the highest since July 2011. The price of the 2.25 percent security due September 2023 fell 0.13, or 1.30 pounds per 1,000-pound face amount, to 93.955.

U.K. government bonds lost 4.5 percent this year through Sept. 6, according to Bloomberg World Bond Indexes, underperforming German securities, which dropped 2.6 percent, and Treasuries, which declined 4 percent, the indexes show.

--With assistance from Lucy Meakin in London. Editors: Paul Dobson, Mark McCord

To contact the reporter on this story: Neal Armstrong in London at

To contact the editor responsible for this story: Paul Dobson at

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