By Beth Mellor and Lukanyo Mnyanda
Nov. 25 (Bloomberg) -- The pound rose against the dollar before a report economists predict will show the U.K. economy contracted less than initially estimated in the third quarter.
Sterling also rebounded from the weakest level in almost two weeks against the euro. The British economy shrank by 0.3 percent in the third quarter, less than a previous estimate of a 0.4 percent contraction, the Office for National Statistics will say today, according to the median forecast of 28 economists surveyed by Bloomberg. The FTSE 100 Index of stocks rose 0.4 percent amid speculation the global recovery is gathering pace.
“There’s certainly an expectation that we’ll see something of an upward revision in the data and markets are biased toward the idea that the U.K. is not in as deep a trough as people expected,” said Jeremy Stretch, a senior currency strategist in London at Rabobank International. “Risk appetite is looking more healthy and that’s also helping” the pound rise, he said.
The U.K. currency advanced 0.8 percent to $1.6712 as of 8:47 a.m. in London, and climbed 0.5 percent to 147.48 yen. Sterling appreciated 0.5 percent to 89.83 pence per euro. The pound weakened to 90.57 pence per euro yesterday, the lowest level since Nov. 12.
The economic slump may be easing after the government boosted spending and policy makers cut their main interest rate to a record low and started to buy 200 billion pounds ($334 billion) of bonds to lower borrowing costs. The Bank of England is encouraged by signs a recovery is emerging even if it isn’t “particularly strong,” Governor Mervyn King said yesterday.
The yield on the two-year note fell 2 basis points to 1.21 percent. The 10-year gilt yield was little changed at 3.65 percent.
To contact the reporters on this story: Beth Mellor in London at bmellor@bloomberg.net; Lukanyo Mnyanda in London at lmnyanda@bloomberg.net
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