The pound strengthened, snapping a three-day drop against the euro, after an industry report showed U.K. house prices increased for a 10th month in November. Sterling gained versus all of it 16 major counterparts. The pound still headed for its biggest weekly drop against the 17-nation currency since October after the Bank of England kept monetary policy unchanged yesterday, while the European Central Bank gave no indication it will introduce further stimulus. U.K. government bonds were little changed even as the central bank said expectations of an interest-rate increase in the coming year rose in the three months through November. “On the sterling front, the relative-growth picture in the U.K. is quite an important factor,� said Ian Stannard, head of European foreign-exchange strategy at Morgan Stanley in London. “A lot of the growth we’ve seen is coming from the housing sector and there’s hope that will then feed through to the consumer sector as well. That’s why that is having an initial positive impact on sterling.� The pound rose 0.2 percent to 83.52 pence per euro at 11:10 a.m. in London, having declined 0.6 percent this week, the most since the period ended Oct. 25. The U.K. currency gained 0.2 percent to $1.6361. U.K. home prices climbed 1.1 percent last month after rising 0.7 percent in October, according to Halifax, the mortgage unit of Lloyds Banking Group Plc. BOE Policy Sterling has gained 5.9 percent in the past six months, the best performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro rose 4 percent and the dollar climbed 0.5 percent. The Bank of England kept its benchmark interest rate at a record-low 0.5 percent and maintained its bond-buying target at 375 billion pounds yesterday. The central bank has pledged to keep rates low until unemployment falls to at least 7 percent, subject to caveats on its 2 percent inflation target and financial stability. Thirty-four percent of respondents to the Bank of England’s quarterly Inflation Attitudes survey said they expect the benchmark interest rate to increase over the next 12 months. That’s up from 29 percent in August. “It was a fairly meaningful jump for the year ahead expectations,� said Sam Hill, a fixed-income strategist at Royal Bank of Canada in London. “Given that inflation expectations have got prominence in the forward guidance framework, that justifies the market taking it into account on the data being released.� The 10-year gilt yield was at 2.92 percent after rising to 2.93 percent yesterday, the highest since Sept. 23. The rate has increased 15 basis points, or 0.15 percentage point, this week. That’s the most since the period ended Sept. 6. The price of the 2.25 percent bond due in September 2023 was 94.36. Gilts handed investors a loss of 4 percent this year through yesterday, according to Bloomberg World Bond Indexes. German securities fell 1.9 percent and U.S. Treasuries declined 2.8 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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