The pound rose against the majority of its most-traded peers as a report showed U.K. construction expanded at a faster pace than economists predicted last month, fueling optimism that the economic recovery is picking up. Sterling climbed to the highest level in more than a week against the dollar and had its longest streak of increases in a year against the yen. U.K. government bonds slipped before a sale of 2021 securities tomorrow as rising stock markets in Europe and Asia curbed demand for the relative safety of fixed income. The FTSE 100 Index rose for a second day, climbing 0.2 percent. “There has been over-pessimism on the U.K. economy,” said Neil Jones, head of European hedge-fund sales at Mizuho Corporate Bank Ltd. in London. “There’s also risk-on sentiment at the moment. If we continue to get higher stocks, sterling will be one of the currencies to gain.” The pound advanced 0.4 percent to $1.6172 as of 1:57 p.m. in London, after strengthening to $1.6133, the strongest level since March 24. It appreciated 0.3 percent to 88.05 pence per euro and was 0.3 percent stronger against the yen at 135.82, rising for a sixth day, the longest run of gains since the period through April 26. A gauge of building activity based on a survey of purchasing managers was at 56.4 last month, near the eight-month high in February, Markit Economics Ltd. and the Chartered Institute of Purchasing and Supply said today. The median of 10 economists surveyed by Bloomberg was for the measure to drop to 54.8. It has been above the 50 level that signals expansion for the past three months, after dipping to 49.1 in December. Home Price Home prices probably increased 0.2 percent in March from February, when they declined 0.9 percent, figures from Halifax, the mortgage unit of Lloyds Banking Group Plc will say this week, according to the median forecast of 10 economists in a Bloomberg survey. Britain’s currency climbed 2.7 percent against the dollar in the first quarter as other data signaled the economy may be rebounding after shrinking in the fourth quarter by 0.5 percent. The central bank said March 29 that mortgage approvals rose in February to the highest level since November. “U.K. construction companies reported a strong end to the first quarter,” Markit economist Sarah Ledger said in the report. The data adds to “evidence that the economy rebounded strongly from the surprise contraction of gross domestic product in the final quarter of last year. However, whether the resurgent growth will prove long-lasting remains in doubt.” U.K. Inflation The 10-year gilt yield rose for a fifth day, climbing one basis point to 3.73 percent after climbing on April 1 to 3.77 percent, the most since Feb. 21. The two-year yield was little changed at 1.38 percent. British government bonds have handed investors a 0.9 percent loss this year, compared with a 2.4 percent decline for German bunds, according to indexes developed by Bank of America Merrill Lynch. Gilts outperformed their German counterparts amid speculation the Bank of England will lag behind the European Central Bank in raising interest rates even as U.K. inflation runs at almost twice the level in the euro area. The U.K. central bank will keep its benchmark interest rate at a record low 0.5 percent on April 7, while the ECB in Frankfurt will increase the refinancing rate for the 17 countries that share the euro by 25 basis points to 1.25 percent, Bloomberg surveys of economists showed. To contact the reporter on this story: Lukanyo Mnyanda in Edinburgh at lmnyanda@bloomberg.net. To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net.

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