By Paul Dobson Oct. 30 (Bloomberg) -- The pound was little changed, headed for its biggest weekly advance against the euro since January, after reports showing gains in consumer confidence and house prices added to signs the U.K. economic recovery is taking hold. The U.K. currency was also poised for a weekly gain versus the dollar after GfK NOP said consumer confidence rose to the highest level in 21 months. Home prices had their first annual increase in 19 months in October, according to Nationwide Building Society. The Bank of England will announce on Nov. 5 whether it will extend a program of debt purchases designed to revive the economy. “Sterling is very undervalued, especially against the euro,” David Woo, global head of foreign-exchange strategy at Barclays Capital in London, said today in a Bloomberg Television interview. “Until the market is confident the BOE is done with quantitative easing, I think it’s going to be very difficult for sterling to rally significantly from these levels.” The pound traded at 89.57 pence per euro as of 12:09 p.m. in London, from 89.58 yesterday, brining its gain this week 2.5 percent, the largest since the five days ended Jan. 30. It was also little changed versus the dollar at $1.6538. The Bank of England, which completed its 175 billion-pound ($290 billion) program of debt purchases this week, will decide on Nov. 5 whether to extend the plan it began more than seven months ago. It will increase the stimulus measures by an additional 50 billion pounds to 225 billion, according to the median forecast of 35 economists surveyed by Bloomberg. Expect ‘Sour’ Sentiment “We expect pound sentiment to turn sour ahead of next Thursday’s BOE meeting,” analysts led by Ulrich Leuchtmann at Commerzbank in Frankfurt wrote in a client note today. They recommended selling the pound if it nears 89 pence per euro. The yield on the 10-year gilt fell 2 basis points to 3.65 percent. The yield on the 2-year note also dropped 2 points, to 0.87 percent. Policy makers around the world are starting to reverse emergency stimulus measures introduced at the height of the global financial crisis. The Bank of Japan said today it will stop buying corporate debt at the end of the year and Germany’s Axel Weber signaled yesterday the European Central Bank may pull back its handouts of emergency liquidity next year. The Bank of England will follow “slightly more cautiously,” former policy maker Charles Goodhart said today in an interview with Bloomberg Television. The bank may scale back or pause its bond-purchase program next week, he said. Rule Changes 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. Sterling may get support from rules requiring U.K. financial institutions to boost their assets, spurring gilt purchases, Morgan Stanley strategist Stephen Hull wrote in a report dated yesterday. “New Financial Services Authority regulations for U.K. banks might result in very large gilt purchases, possibly allowing the Bank of England an easy exit from its quantitative- easing program, something worrying pound bears,” The British currency may weaken in the “short term” because the central bank will probably extend its debt-buying program, according to Hull.

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