June 9 (Bloomberg) -- The pound rose against the dollar and the yen as a report showed the U.K. trade deficit narrowed more than forecast in April. Sterling also rose against the Swiss franc and the Australian dollar. The U.K. currency was within a penny of a one-month low against the euro amid speculation the Bank of England will keep interest rates on hold at a record low while the European Central Bank signals it may increase rates as soon as next month. “An improvement in the trade picture may mean sterling outperforms,” Adrian Schmidt, a currency strategist at Lloyds Bank Corporate Markets in London, wrote in an investor report today. “The sharp improvement in the U.K. balance of late is potentially significant for sterling.” The pound climbed 0.2 percent to $1.6444 and 0.4 percent to 131.58 yen as of 9:59 a.m. in London. The U.K. currency was little changed at 88.93 pence per euro. It rebounded yesterday after touching 89.76 pence, the weakest level since May 5. U.K. government bonds were little changed, with the 10-year yield at 3.28 percent and the two-year yield at 0.85 percent. The goods-trade gap was 7.4 billion pounds compared with 7.7 billion pounds in March, the Office for National Statistics said today. Sterling has fallen against the euro on all but one day this month as investors added to bets that the central bank will keep interest rates on hold while the government reduces spending to trim Britain’s deficit. BOE Rates Hold None of the 55 analysts surveyed by Bloomberg predict that the Bank of England will change its benchmark interest-rate today. The ECB is likely to “press on” with raising rates, said Ken Wattret, chief euro-region economist at BNP Paribas SA in London. The Bank of England has kept its main interest rate at a record-low 0.5 percent since March 2009, and bought 200 billion pounds of bonds under a so-called quantitative-easing program that ended in January 2010. Traders are speculating that policy makers will hold interest rates until April, according to Tullett Prebon Plc data showing forward contracts on the sterling overnight interbank average. The pound strengthened against the euro after the last Bank of England decision on May 5, when policy makers kept the benchmark rate unchanged, as ECB President Jean-Claude Trichet signaled euro-area interest-rate increases may be later than expected. --Editors: Matthew Brown, Mark McCord To contact the reporter on this story: Paul Dobson in London at pdobson2@bloomberg.net To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

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