2013.07.2301:37:42UTC+00Pound powers up for a fifth day as Cameron sees recovery; Gilts surge

The pound powered up for a fifth day versus the dollar, the longest winning streak in almost three months, after Prime Minister David Cameron said a developing economy may give a chance to the government to trim taxes.

The U.K. currency moved higher against 12 of its 16 major counterparts before a report this week that analysts say will show economic progress accelerated in the second quarter. The expansion of the financial services industry may create more than 250,000 jobs and fuel a 2 percent to 3 percent increase in gross domestic product, according to PricewaterhouseCoopers LLP. U.K. government bonds rose.

‘Growing Stronger’

“As we start to see the economy grow stronger -- and it is growing stronger -- as we start to see the country improve, actually I want to give people back some of their hard-earned money and try to reduce their taxes,” Cameron said in an interview on BBC Television broadcast yesterday. “Your economy does better if you say to people you’ve worked hard, you’ve done the right thing, here is some of your own money back.”

Limited Advances

Britain’s recovery remains bumpy and the pound’s gains will also be limited in the middle of assumption that the central bank will introduce formal policy guidance in August, according to Morgan Stanley.

“The uneven nature of the recovery is potentially pound negative,” Morgan Stanley analysts led by Hans Redeker, head of global foreign-exchange strategy in London, wrote today in a note to clients. “We maintain our medium-term pound view despite our short position being challenged.” A short position is a bet an asset will decline.

The pound has bolstered 2.1 percent in the past three months, according to Bloomberg Correlation-Weighted Indexes that track 10 developed-market currencies. The euro improved 2.7 percent and the dollar jumped 1.6 percent.

The 10-year gilt yield pulled back two basis points, or 0.02 percentage point, to 2.26 percent after declining to 2.24 percent on July 19, the worst state since June 20. The 1.75 percent bond due in September 2022 rose 0.19, or 1.90 pounds to 1,000-pound face amount, to 95.81.

Britain’s government securities handed investors a loss of 2.5 percent this year through July 19, according to Bloomberg World Bond Indexes. German bonds retreat 0.6 percent and Treasuries missed 2.2 percent.