The pound, the developed world's best- performing currency over the past three months, may get another boost from signs of economic strength.
Even with the prospect of Chancellor of the Exchequer George Osborne announcing an acceleration of austerity in his special budget on July 8, data due next week from housing to industrial production will point to an economy that is gaining momentum, analysts said. Among the major currencies, sterling has been supported by speculation that the Bank of England, which decides on monetary policy next week, will be the first major central bank to raise interest rates after the Federal Reserve.
"The market is still quite optimistic for the pound," said Jane Foley, a senior currency strategist at Rabobank International in London. While there are "significant headwinds for the pound" the "more constructive outlook has been supportive. That boils down to continued appreciation of sterling against the euro."
The pound fell this week for the first time since June 5 versus the euro, having touched the strongest level in more than seven years, as a survey showed Greece's voters were split before a referendum Sunday on whether to accept the terms of a European financial bailout.
The pound has strengthened 5.8 per cent in the past three months, the best performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. It's been supported by signs Britain's economic recovery is gathering pace. The euro gained 2.2 per cent and the dollar advanced 0.8 per cent, the indexes showed.
U.K. house prices climbed 0.3 per cent last month, rebounding from a 0.1 per cent drop in May, mortgage lender Halifax, a division of Lloyds Banking Group, will say next week, according to a Bloomberg survey of economists.
