The pound surged yesterday to its highest overall levels this year as hopes that the British economy is emerging from recession continued to burgeon.

Sterling charged upwards on the foreign exchanges as mounting indications that Britain’s worst economic slump since the Second World War will end by the autumn led investors to pile into the currency once more.

Markets’ swelling optimism that Britain could become the first of the West’s big economies to break out of recession was given a further boost as a key gauge of future economic prospects registered its first rise since October 2007.

The leading economic index produced by the Conference Board, a private research group, rose sharply in April, by 0.9 per cent, providing more evidence that the economy is on course for a recovery.

The latest dose of upbeat news came after the country’s leading economics think-tank, the National Institute of Economic and Social Research, said on Wednesday that it believed the recession was over.

The institute estimated that the economy saw renewed, if modest, growth in April and May. Official GDP data for the second quarter is not released until July 24.

The Conference Board’s index is compiled from a series of key economic factors that, when taken together, tend to give the clearest signals of future conditions in the economy. The factors include consumer confidence; the stock market; the level of bond yields, which determine market interest rates; corporate profitability; and productivity.

The US-based research group said that in recent weeks the strongest positive contributions to the upswing in its index came from confidence, share prices, yields and businesses’ expectations of future output.

Jean-Claude Manini, the board’s senior economist, sought to temper its rosy message, however, with a note of caution. “The UK index has finally followed the lead of the eurozone index. But its improvement is less marked. As such, there is still no reason to think that the UK will recover before the euro area,” he said.

Mr Manini’s caution echoed admonitions from senior Bank of England officials this week, who have continued to warn that an economic upturn will be hard won and slow and could prove tough to sustain.

Those warnings did not deter currency markets from driving the pound upwards as investors bet that recessionary forces are fading.

The Bank’s trade-weighted index of sterling’s overall value hit its highest point this year. It climbed to 83.9, a level not seen since last November and up almost 15 per cent from lows of 73 at the start of January.

The pound’s gains were broad-based, against both the dollar and the euro. It jumped by almost 1.6 cents against the dollar, or nearly 1 per cent, to close above $1.65 for the first time since last October. Against the euro, it reached its highest values this year, with the single currency ending the day down more than 0.4p at 85.18p per euro.

Growing optimism that the worst of the present economic slump may have passed is also being reflected in the rest of the world. Officials in the Group of Eight economies said that the International Monetary Fund was poised, early next month, to raise its global growth forecast for 2010 to 2.4 per cent, sharply up from the 1.9 per cent projection that the IMF released in April.

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