The pound posted its biggest gain in a week against the dollar after a report showed U.K. retail sales rose more than economists predicted in June, damping concern that the economy might slip back into a recession. Sterling also strengthened versus the euro. Sales climbed 0.7 percent on the month, the Office for National Statistics said today in London. Economists in a Bloomberg survey predicted a 0.5 percent gain. U.K. stocks advanced with their European counterparts after growth in Europe’s services and manufacturing industries unexpectedly accelerated in July. “The retail numbers were very punchy,” said Paul Mackel, a director of currency strategy at HSBC Holdings Plc in London. “The European data set has been surprisingly strong and the pound is riding the coattails.” The pound advanced 0.7 percent to $1.5271 as of 10:52 a.m. in London, after earlier climbing by 0.8 percent, the biggest gain since July 15. The British currency appreciated 0.2 percent to 83.96 pence per euro. Sterling may rise to $1.62 by year-end, Mackel said. The median estimate of 37 analyst predictions compiled by Bloomberg is for the currency to end 2010 at $1.47. U.K. 10-year government bonds were little changed, erasing an earlier gain. The yield was at 3.34 percent after being as low as 3.31 percent. The two-year yield was at 0.79 percent. Gilts returned 5.8 percent this year, compared with a gain of 3.1 percent for bonds in the euro area, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German debt rose 6.6 percent, the indexes showed. To contact the reporter on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net

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