The pound rose to its highest level in four months against the dollar after reports on manufacturing, house prices and retail sales added to evidence the economy is past the worst of the slump. The British currency also advanced against the euro as the Office for National Statistics said industrial production dropped at the slowest pace in 13 months. The Royal Institution of Chartered Surveyors said the number of real-estate agents and surveyors saying prices fell exceeded those reporting gains by the least since January 2008. The British Retail Consortium reported store sales climbed in April from a year earlier. “The numbers were better than expected and there’s some relief in the market that things aren’t getting worse,” said Elisabeth Andreew, chief currency strategist at Nordea Bank AB in Copenhagen. “There’s some optimism coming back, leading to pound buying.” The pound gained as much as 1.2 percent to $1.5304, its strongest level since Jan. 9, and was at $1.5293 by 11:40 a.m. in London. It gained 0.6 percent to 89.29 pence per euro. The U.K. currency may strengthen to 88 pence per euro this week, according to Andreew. The Bank of England said last week there are “promising signs” the recession is moderating after three straight quarters of contraction in Europe’s second-largest economy. Homebuilder Redrow Plc said today it’s restarting construction on some mothballed developments after sales “stabilized.” The pound’s gains may not last because of “long-term structural problems,” said Ian Stannard, a senior currency strategist in London at BNP Paribas SA. Unlikely to Last The data “may provide support for sterling near term,” he said. “However, we are still cautious about sterling.” The currency is unlikely to surpass $1.54, according to Stannard. Government bonds were little changed. The 4.5 percent security due March 2019 slipped 0.02, or 20 pence per 1,000- pound face amount, to 106.87, leaving the yield at 3.66 percent. The two-year yield also increased less than one basis point, to 1.16 percent. Bond yields move inversely to prices. The Debt Management Office sold 2.25 billion pounds of gilts maturing 2030 at an average yield of 4.39 percent today. The 4.75 percent securities attracted buyers for 2.24 times the amount offered, compared with a so-called bid-to-cover ratio of 1.37 times when the notes were last sold on Nov. 4. Britain will sell a record 220 billion pounds of gilts this fiscal year, 50 percent more than last year, as the government seeks to finance measures to bolster the $2.8 trillion economy. The DMO failed to find enough buyers at a sale of securities on March 25, the first so-called failed auction since 2002. ‘Onerous Issuance’ “Supply is still the biggest problem for gilts,” said Nick Stamenkovic, a strategist in Edinburgh at RIA Capital Markets, a securities broker for banks and institutional investors. “There’s an onerous amount of issuance to come.” U.K. government bonds lost 2.7 percent this year, compared with a 0.7 decline by German bonds, according to Merrill Lynch & Co’s U.K. Gilts and German Federal Governments indexes. The pound declined 26 percent against the dollar last year and 23 percent versus the euro as the economy began shrinking. The central bank lowered its benchmark interest rate to a record low of 0.5 percent in March to revive consumer demand. Manufacturing output slipped 0.1 percent from February, the Office for National Statistics said today in London. Economists predicted a 0.8 percent drop, according to the median of 23 forecasts in a Bloomberg News survey. Enquiries from new homebuyers rose to the highest level since 1999, the RICS said. The BRC reported a 6.3 percent increase in store sales last month, up from 0.6 percent in March. “The data appear supportive for the pound,” Greg Gibbs, a currency strategist at Royal Bank of Scotland Group Plc in Sydney, wrote in a report today. “The BRC retail sales monitor showed a sharp recovery in sales.”

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