The pound rose against most major currencies after a survey showed U.K. business owners expect activity to pick up, prompting investors to pare bets that borrowing costs will remain at a record low for another year. The pound advanced against the euro after posting losses last week. The Lloyds TSB Business Barometer index for business activity in the next 12 months rose to 46 in June, the highest since May last year, while a Lloyds index for current economic optimism rose to 36 from 14. Bank for International Settlements said in an annual report that central banks need to start raising interest rates to control inflation. “Sterling weakness looks a bit overdone on the basis of the latest news,” said Adrian Schmidt, a currency strategist at Lloyds Bank Corporate Markets in London. “The market doesn’t expect the first rate hike to take place perhaps until August, and I think that’s too pessimistic. Our survey suggests the economic outlook is not as bad as priced in by the market.” The pound appreciated 0.2 percent against the euro to 88.74 pence as of 8:30 a.m. in London. Sterling rose to $1.5985 before trading little changed at $1.5967. It advanced 0.5 percent against the yen to 128.99 yen. The British currency fell 7.2 percent in the past 12 months, making it the third worst performer among 10 major- economy currencies after the U.S. and Canadian dollars, according to Bloomberg Correlation-Weighted Currency Indexes. Gilts were little changed, with 10-year yields holding at 3.14 percent. Two-year notes yielded 0.71 percent compared with 0.70 percent last week. To contact the reporter on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net.

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