Pound jumps and gilts extend loss after PPI data

LONDON (Reuters) - The pound moved into positive territory versus the dollar on Monday, while interest rate futures extended losses after robust producer price data for April added to the Bank of England's policy dilemma.

The Office for National Statistics said that output prices rose an unadjusted 1.4 percent on the month in April, taking the annual rate up to 7.5 percent. Both rates were the highest since the series began in 1986.

By 10:40 a.m., the pound had jumped roughly half a cent to trade at $1.9550, up 0.1 pct on the day.

Short sterling interest rate futures tumbled to stand as much as 12 ticks lower on the day, doubling early losses. The June gilt future fell to stand 50 ticks lower on the day, having been 19 ticks lower beforehand.

The FTSE 100 did not react to the data, and stood up 0.7 percent on the day.

"On all the fronts the data was stronger than expected ... In particular, the gain in output prices will be of some concern to members of the MPC, at least the more hawkish members, as it's evidence that the price rises are making their way through the production chain," said Daragh Maher, senior currency strategist at Calyon.

"It adds to the view that inflation remains a potent threat to the UK."

(Reporting by London Markets Team)