The pound strengthened against the dollar, snapping a three-day slide, before a report forecast to confirm the U.K. economy contracted for a third straight quarter in the three months to June. Sterling was little changed versus the euro, approaching the strongest in almost three weeks as Spanish protesters marched for a second night in Madrid, calling for a reversal of austerity measures. U.K. gross domestic product fell 0.5 percent in the second quarter, according to the median estimate of 28 economists in a Bloomberg News survey. The pound advanced 0.2 percent to $1.6195 as of 8:01 a.m. London time. It reached $1.6309 on Sept. 21, the most since Aug. 31, 2011. Sterling was little changed at 79.55 pence per euro after appreciating to 79.37 pence on Sept. 25, the strongest level since Sept. 7. The pound has strengthened 2 percent this year, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-market currencies. The euro tumbled 3.2 percent and the dollar weakened 2.6 percent. Gilts returned 3.6 percent this year through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bunds also gained 3.2 percent and U.S. Treasuries rose 2.4 percent. To contact the reporter on this story: Lucy Meakin in London at lmeakin1@bloomberg.net. To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net.

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