The pound reached the highest in more than two months against the dollar and gilts rose as U.S. lawmakers remained deadlocked over a plan to raise the debt ceiling, increasing the relative appeal of U.K. assets. The pound also strengthened versus the euro, even as economists forecast a report due today will show U.K. factory orders fell in July. The dollar weakened against most of its major peers as President Barack Obama and Congress remained at odds overs plans to raise the U.S. debt limit. “External factors are driving the pound, namely whether the U.S. will raise its debt ceiling,” said You-na Park, a currency strategist at Commerzbank AG in Frankfurt. “If we don’t see a result in the next few days, then this will continue to weigh on the dollar and the pound will strengthen.” The pound was little changed at $1.6415 as of 8:33 a.m. in London, after reaching $1.6439, the most since June 14. Sterling climbed 0.8 percent yesterday. It strengthened 0.1 percent to 88.32 pence per euro today and lost 0.3 percent to 127.42 yen. Today’s orders gauge, based on a survey of manufacturers conducted by the Confederation of British Industry, probably fell to -3 in July, from a month earlier, according to a Bloomberg survey of 14 economists. Data yesterday showed that U.K. gross domestic product rose 0.2 percent in the second quarter, slowing from the previous three months’ 0.5 percent pace. That matched the median forecast of 32 economists in a Bloomberg News survey. Miles Speech “The growth data came in as expected, so we saw some kind of relief that the figure was not that bad, and the pound strengthened,” Park said. “If the U.S. debt issue is solved, then the market focus will shift back to economic data. If we see some more negative data, then this will be more negative for the pound.” Bank of England policy maker David Miles is due to give a speech at the London School of Economics at 6:30 p.m. Sterling is still down 8.5 percent in the last 12 months, making it the second-worst performer among 10 developed-market currencies after the U.S. dollar, according to Bloomberg Correlation-Weighted Currency Indexes. U.K. government bonds rose, pushing the yield on the 10- year gilt down four basis points to 3.03 percent. Two-year note yields declined one basis point to 0.70 percent. To contact the reporter on this story: Emma Charlton in London at echarlton1@bloomberg.net To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

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