The pound strengthened against the dollar and euro after a report showed Britain’s economy expanded more than analysts forecast in the three months through June. Benchmark 10-year gilt yields were about five basis points from the highest level in two years. Gross domestic product increased 0.7 percent from the first quarter, when it rose 0.3 percent, the Office for National Statistics in London said. That compared with an initial estimate of 0.6 percent released on July 25, which was also the median of 34 forecasts in a Bloomberg News survey. “It adds to a run of better-than-expected numbers,� said Daragh Maher, a foreign-exchange strategist at HSBC Holdings Plc in London, referring to the GDP data. “It marks a good finish to the week� for sterling, he said. The pound rose 0.2 percent to $1.5623 at 10:08 a.m. London time after weakening 0.5 percent yesterday, the steepest decline since Aug. 1. Sterling appreciated 0.2 percent to 85.53 pence per euro, trimming this week’s drop to 0.3 percent. The 10-year gilt yield was little changed at 2.71 percent after climbing to 2.76 percent yesterday, the highest since Aug. 8, 2011. The price of the 1.75 percent bond due in September 2022 was 92.34. The rate has increased one basis point, or 0.01 percentage point, this week. Gilts lost investors 4.3 percent this year through yesterday, according to Bloomberg World Bond Indexes. German bonds dropped 2.5 percent and Treasuries declined 3.9 percent. To contact the reporter on this story: Morgane Lapeyre in London at mlapeyre@bloomberg.net; Lucy Meakin in London at lmeakin1@bloomberg.net. To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net

Source