The pound climbed to a six-month high against the euro after an index of U.K. consumer confidence rose in May to its highest level this year, fueling speculation the worst of the recession is over. The British currency surpassed $1.66 for the first time in seven months and surged to the strongest versus the euro since Dec. 3 after a government report showed Australia’s economy unexpectedly grew in the first quarter, underpinning investor optimism the global economy is improving and denting demand for safer assets. An index of U.K. service industries expanded in May for the first time in more than a year. “The fact consumer confidence rose is an obvious reason” for the pound to rise, said Sonja Marten, a currency strategist in Frankfurt at DZ Bank AG. “But ultimately, we’ve seen the dollar fall against everything and I think that’s the main driver behind this move.” The pound strengthened to 86.02 pence per euro by noon in London, from 86.29 pence yesterday. It also traded at $1.6550, after earlier reaching $1.6662, the highest level since Oct. 30, from $1.6580. The Chartered Institute of Purchasing and Supply and Markit Economics said its index climbed to 51.7, from 48.7 in April. The median estimate of 23 economists surveyed by Bloomberg was for a reading of 49.5. Readings above 50 indicate expansion. Gilts rose, pushing the yield on the 10-year government bond down 10 basis points to 3.79 percent. The 4.5 percent bond due March 2019 gained 0.86, or 8.6 pounds per 1,000-pound face amount, to 105.78. Yields move inversely to bond prices. The government sold all the 3.5 billion pounds of 4.5 percent securities due 2019, attracting demand 2.51 times more than the amount offered, the U.K. Debt Management Office said today. The bonds will yield an average 3.795 percent. “The auction went well,” said Adam McCormack, head of gilt sales at Barclays Capital in London. “The market prepared for the supply, it sold off a lot, and the 10-year gilt is the cheapest to deliver against futures.”

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