The pound strengthened versus the euro for the first time in four days before reports next week that economists say will show U.K. mortgage approvals increased and an index of manufacturing rose for a fifth month in July. Sterling headed for a third weekly advance against the dollar. Lenders granted 59,600 home loans in June, the most since March 2008, from 58,200 the previous month, a Bank of England report will say on July 29, according to the median estimate of analysts in a Bloomberg News survey. The Office for National Statistics said yesterday gross domestic product growth accelerated in the second quarter. The Bank of England issues its quarterly Inflation Report on Aug. 7. Gilts rose. “We know the growth outlook has been improving and that has been confirmed by the initial reading of the second-quarter GDP print -- accordingly that’s had a positive impact� on the pound, said Chris Walker, a foreign-exchange strategist at Barclays Plc in London. “I’d rather be short pound heading into the Inflation Report,� he said, referring to a bet the currency will weaken. The pound appreciated 0.2 percent to 86.13 pence per euro at 1:56 p.m. London time. It was little changed at $1.5395, set for a 0.8 percent advance this week. A factory gauge released by Markit Economics and the Chartered Institute of Purchasing and Supply on Aug. 1 will rise to 52.8 in July from 52.5 in June, according to the median estimate in a Bloomberg survey. That’s above the 50 level that divides expansion from contraction. GDP Expands U.K. GDP increased 0.6 percent in the second quarter from 0.3 percent in the first three months, the ONS said, matching analyst forecasts. Sterling rose 0.7 percent in the past three months, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies. The euro added 3.3 percent and the dollar climbed 1.3 percent. The yield on 10-year gilts fell four basis points, or 0.04 percentage point, to 2.34 percent. It’s poised for a five basis-point increase this week, the biggest gain since the five days ended June 21. The 1.75 percent security due September 2022 rose 0.31, or 3.10 pounds per 1,000-pound face amount, to 95.19. Gilts handed investors a loss of 3.1 percent this year through yesterday, according to Bloomberg World Bond Indexes. German bunds lost 1.3 percent and U.S. Treasuries declined 2.6 percent. To contact the reporter on this story: Eshe Nelson in London at enelson32@bloomberg.net To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net

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