The pound traded within one pence of a seven-week low versus the euro and gilts extended a weekly drop as the fastest U.S. growth in a year and optimism over Europe’s debt deal boosted demand for higher-yielding assets. Five-year U.K. notes also headed for a weekly drop as stocks rose in Asia and Europe on optimism the global economic recovery will stay on track. U.K. consumer confidence fell to a 2 1/2-year low this month as Britons became more pessimistic about spending, GfK NOP Ltd. said in a report today. The pound was little changed versus the dollar, heading for a third straight weekly advance. “We’re seeing a return of risk appetite thanks to renewed levels of confidence from the European debt crisis deal,” said Neil Jones, head of European hedge-fund sales at Mizuho Corporate Bank Ltd. in London. “Gilts have taken a whack as the market moves away from the safety of bonds, while the euro is outperforming against most currencies, including sterling.” The pound was little changed at 88.19 pence per euro at 9:22 a.m. in London, after reaching 88.31 pence yesterday, the weakest since Sept. 8. That left the U.K. currency on course for a 1.2 percent decline against the euro this week. Sterling was also little changed at $1.6107, leaving its weekly advance at 1 percent. The 10-year gilt yield climbed eight basis points to 2.71 percent, extending its gain this week to 17 basis points. The two-year yield was one basis point higher at 0.61 percent, three basis points above its close at the end of last week. The FTSE 100 Index of U.K. shares was 0.4 percent higher, while the Stoxx Europe 600 Index added 0.6 percent. U.S. Growth A Commerce Department report yesterday showed the U.S. economy grew at a 2.5 percent annual rate in the third quarter, up from 1.3 percent in the prior three-month period. An accord was reached yesterday by European leaders to expand the size of their rescue fund to 1 trillion euros ($1.4 trillion) while agreeing with bank representatives that lenders should accept a 50 percent writedown on their Greek debt holdings. The U.K.’s GfK consumer sentiment index dropped 2 points from September to minus 32, the London-based research group said today. That’s the weakest reading since February 2009. The pound has weakened 1.4 percent in the past month against a basket of nine developed-market peers, extending its decline over the past year to 4.9 percent, according to Bloomberg Correlation-Weighted Currency Indexes. To contact the reporters on this story: Keith Jenkins in London at Kjenkins3@bloomberg.net; Garth Theunissen in London gtheunissen@bloomberg.net To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

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