The pound headed for its biggest monthly gain against the dollar in almost a quarter of a century after an industry report showed U.K. house prices unexpectedly jumped in May, a sign the property slump may be easing. Britain’s currency rose to its strongest in seven months versus its U.S. peer and climbed against the euro after separate data showed consumer confidence matched the highest level in almost a year in May as people became more optimistic they can weather the recession. The FTSE 350 Banks Index headed for a third monthly advance. “The pound is rising partly because of the housing survey and because of the overall positive momentum in the gradual recovery story coming through,” said Thanos Papasavvas, head of currency management in London at Investec Asset Management. “There was a lot of bad news priced into sterling. This is partly a re-balancing back to fair value for the pound.” The pound climbed to as high as $1.6173, the strongest since Nov. 5, before trading at $1.6132 by 12:10 p.m. in London. It gained 9 percent this month, the most since March 1985, when Margaret Thatcher was Prime Minister of the country. It appreciated 0.2 percent to 87.25 pence per euro, leaving it 2.5 percent higher in May. The average cost of a home rose 1.2 percent to 154,016 pounds ($245,701) after declining 0.3 percent in April, Nationwide Building Society said in a statement today. Economists predicted a drop of 0.9 percent, according to the median estimate of 14 economists surveyed by Bloomberg News. An index of consumer sentiment stayed at minus 27, the same as in April, when it was the strongest in 11 months, GfK NOP said today in London. The survey of 2,005 people was conducted between May 1 and May 10. Moving Average The pound climbed 2.3 percent since it broke through its 200-day moving average versus the dollar on May 20, a sign to investors who use charts to plot currency moves that sterling will extend its advance. The U.K. currency rallied this month even after Standard & Poor’s signaled May 21 that Britain may lose its top credit rating for the first time as the government’s finances deteriorate. The U.K.’s budget deficit this year will reach 175 billion pounds, or 12.4 percent of gross domestic product, Chancellor of the Exchequer Alistair Darling said April 22. Gilts gained with European bonds, pushing the yield on the 10-year U.K. security five basis points lower to 3.74 percent, declining from near the highest level since Feb. 11. The 4.5 percent bond due March 2019 advanced 0.45, or 4.5 pounds per 1,000-pound ($1,617) face amount, to 106.15.

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