The pound strengthened against the euro and the dollar after a report showed a measure of U.K. service industries exceeded economists’ forecasts in June, alleviating concerns about the recovery. Sterling advanced versus all but one of 16 major peers monitored by Bloomberg. A gauge of U.K. services growth based on a survey of companies rose to 53.9 from 53.8 in May, Markit Economics Ltd. and the Chartered Institute of Purchasing and Supply said today in a report. The median forecast of 26 economists polled by Bloomberg predicted a decline to 53.5. A level above 50 indicates expansion. “The focus from the market right now is very much on the growth numbers, and positive data outcomes will tend to be supportive of sterling,” said Chris Scicluna, deputy head of economic research at Daiwa Capital Markets Europe in London. The pound appreciated 0.5 percent to 89.89 pence per euro as of 4:39 p.m. in London, the first time in three days that it has traded stronger than the 90 pence level. Sterling was little changed at $1.6090 for a third consecutive day of gains. The pound has slumped this year against 12 of 16 major currencies tracked by Bloomberg as Conservative Prime Minister David Cameron’s austerity measures to shrink the budget deficit crimp growth and inflation squeezes incomes at the fastest pace since the 1970s. Efforts to eliminate the bulk of the fiscal shortfall by 2015 involve the deepest spending cuts since World War II and more than 300,000 state-employee job losses. Short-Sterling Futures Barclays Capital today reduced its pound forecasts on “very disappointing” economic growth, according to a client note written by London-based foreign exchange strategists Paul Robinson and Sara Yates. The bank now expects the pound to fall to 93 pence per euro in one month, from an earlier prediction 89 pence before slipping to 95 pence in three months time, compared with a previous prediction of 87 pence, the note said. Worsening economic growth has prompted traders to reduce bets on higher rates, with the implied yield on short-sterling futures expiring in March falling to 1.01 percent today, down from an intraday high of 2.13 percent on Feb. 15. That’s the highest implied yield since May 18, 2010. Short-sterling futures are used by analysts to gauge the future trajectory of borrowing costs between banks. The Bank of England will keep its main rate unchanged at 0.5 percent on July 7 when it announces its next monetary-policy decision, according to all 51 analysts surveyed by Bloomberg. Borrowing Costs Investors are betting the central bank won’t raise borrowing costs until after next May, according to forward contracts on the sterling overnight interbank average, data from Tullett Prebon Plc show. As recently as February, traders were betting on a rate increase in May of this year, the data showed. Ten-year gilts rose for a second day, lowering yields by four basis points to 3.32 percent. Yields on two-year notes were little changed at 0.81 percent. Britain sold 3.25 billion pounds of 3.75 percent bonds due September 2021 at an auction today, the U.K. Debt Management Office said. Investors bid for more than twice the amount offered, DMO data showed. The U.K. plans to sell 1.1 billion pounds of inflation- linked securities maturing in September 2027 tomorrow. To contact the reporter on this story: Garth Theunissen in London at gtheunissen@bloomberg.net To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

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