By Paul Dobson Oct. 29 (Bloomberg) -- The pound climbed against the dollar for a fourth day and gilts slid after reports showed U.K. mortgage approvals increased more than forecast last month and the U.S. returned to growth in the third quarter. The gains helped propel sterling toward its first monthly advance versus the dollar since July. Lenders granted 56,215 home loans in September, the Bank of England said, beating the median estimate of 20 economists surveyed by Bloomberg. The U.S. grew at a 3.5 percent pace from July through September, the Commerce Department said in Washington. That’s the first expansion in more than a year and surpassed the 3.2 percent median forecast in a separate Bloomberg survey. “If we get strong data, be that in the U.K. or globally, it’s a good thing for sterling,” said Henrik Gullberg, a strategist in London at Deutsche Bank AG, the world’s biggest currency trader. The U.S. GDP data was “a pretty strong report,” he said. The British currency advanced as much as 1.3 percent to $1.6579 and was at $1.6563 as of 1:38 p.m. in London. The pound strengthened 0.5 percent to 89.41 pence per euro, and climbed 1.6 percent to 150.99 yen. The pound was poised to snap three consecutive months of declines versus the euro even after data last week from the Office for National Statistics showed U.K. gross domestic product unexpectedly shrank 0.4 percent in the third quarter. Sterling Gains Sterling appreciated 2.5 percent versus the euro this week and 1 percent against the dollar after separate reports showed U.K. retail sales increased to the highest level in almost two years in October and home prices in England and Wales advanced almost 4 percent since April. “The market overreacted to the weak GDP numbers” in the U.K., Gullberg said earlier. “What we have seen since is the market has moderated its bearish opinion.” The U.K. currency dropped 5 percent against the euro since June on concern that the economic recovery was faltering and policy makers might expand their debt-buying program designed to cap borrowing costs. The pound jumped more than 12 percent versus the common European currency in the first half. European Central Bank council member Axel Weber signaled today the bank may start to withdraw its emergency stimulus measures next year by scaling back its “very long-term” loans to banks. Bank of England policy makers announce on Nov. 5 their decision on interest rates and whether they will extend the program of debt purchases. Gilts dropped following the U.S. GDP report. The yield on the two-year note jumped 7 basis points to 0.90 percent, and the 10-year gilt yield advanced 6 basis points to 3.66 percent.

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