By Paul Dobson May 12 (Bloomberg) -- The pound rose against the dollar for a third day as the Conservative Party said it will prepare an emergency budget to narrow Britain’s record deficit after forming a coalition government. Sterling neared its highest level against the euro in almost a year as Prime Minister David Cameron’s chancellor of the exchequer, George Osborne, prepared to announce measures within 50 days to cut spending by 6 billion pounds ($9 billion). The measure is part of the Conservative Party’s deal with its coalition partners, the Liberal Democrats, announced yesterday. U.K. data today may show a decline in jobless claims. The Bank of England also publishes its quarterly inflation report today. “The hard work now begins for the government,” said Jeremy Stretch, a senior currency strategist at Rabobank International in London. “We’ve got to see how durable the pact will prove to be. Looking to make a down payment on deficit reduction should be fairly well received by the market. The labor market picture will look quite promising.” The pound rose 0.3 percent to $1.4997 as of 8:42 a.m. in London after falling as much as 0.6 percent to $1.4861. It was 0.2 percent stronger against the euro at 84.49 pence after trading at 84.28 pence on May 6, the strongest since June 22. Government bonds were little changed, with the 10-year gilt yield at 3.87 percent. --With assistance from Robert Hutton in London. Editors: Keith Campbell, David Clarke. To contact the reporter on this story: Paul Dobson in London at pdobson2@bloomberg.net To contact the editor responsible for this story: Justin Carrigan at jcarrigan@bloomberg.net

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