Pound advances after IMF raises U.K. growth forecast

The pound extended gains against the dollar on Tuesday, surging to one-month highs after the International Monetary Fund raised its forecast for U.K. economic growth this year.

GBP/USD hit session highs of 1.6742, the strongest level since March 7 and was last up 0.78% to 1.6736.

Cable was likely to find support at 1.6601, the session low and resistance at 1.6785.

Sterling extended gains against the softer dollar after the IMF said it now expected the U.K. economy to expand by 2.9% in 2014, up from a previous forecast of 2.5% in January.

The IMF expects the U.K. economy to outstrip growth in its G7 counterparts, with growth of 2.8% forecast for the U.S., and a GDP expansion of 1.7% expected in Germany.

In its quarterly World Economic Outlook report, the IMF said it expects the global economy to grow by 3.6% this year, and 3.9% in 2015, both 0.1 percentage point lower than in January.

The pound moved higher against the dollar earlier Tuesday after data showed that U.K. industrial output increased at the fastest pace since June 2013 in February. The upbeat boosted the outlook for the wider economy and sparked speculation that the Bank of England could raise interest rates sooner.

The Office for National Statistics reported that U.K. industrial production increased 0.9% in February and was up 2.7% on a year over year basis. Market expectations had been for a monthly gain of 0.3% and an annual increase of 2.2%.

Manufacturing output jumped by 1.0% month-on-month in February, the biggest rise since September 2013, and the third successive monthly increase, and was 3.8% higher on a year-over-year basis.

Elsewhere, sterling was trading close to one-month highs against the euro, with EUR/GBP down 0.36% to 0.8244.