London, Feb. 1 (Bloomberg) -- The British pound fell, extending its decline against the dollar this year to 3.3 percent, on signs the biggest economy is recovering from a recession. Sterling slipped to $1.4063, from $1.4122 late yesterday. That was the lowest for three days. It was at 60.99 pence per euro, from 60.84. The pound is little changed against the euro this year. The U.S. economy grew in the fourth quarter, confounding economists' expectations for a second contraction, a report this week showed. Prospects for a return to growth in the No. 1 economy may boost the dollar as investors favor U.S. assets, such as stocks, over those in Europe. ``The strength of sentiment for a U.S. recovery is making the euro and sterling fall'' against the dollar, said Mitul Kotecha, head of foreign-exchange research at Credit Agricole Indosuez. ``We're seeing a big portfolio shift to U.S. assets from European ones.'' Reports today will probably show the U.S. economy in January lost the fewest jobs in six months, and that a national index of manufacturing activity is pointing toward expansion for the first time in 1 1/2 years, Bloomberg News polls showed.

Increased Confidence
Separate figures are expected to show the University of Michigan's consumer confidence index probably rose in January to 94.2, the highest in 12 months, after jumping to 88.8 in December. The unemployment report is due at 1:30 p.m., London time, and the confidence and manufacturing statistics are expected at 2:50 p.m. and 3 p.m., respectively. ``The outlook for (sterling) remains bearish with positive news coming out of the U.S.,'' said Ian Stannard, a currency strategist at BNP Paribas. ``The bearish-sterling picture is being reinforced by negative news on the U.K. side.'' The pound may slip to $1.4045 in coming days, he said. There are no British reports scheduled for release today that are expected to move the pound, analysts said. Sterling was also pulled lower by euro's decline against the U.S. currency, Kotecha at Credit Agricole said. Europe's common currency declined to a six-month low of 85.65 U.S. cents, from 85.93 late yesterday, before trading at 85.83. It has fallen 3.5 percent against the dollar this year. The pound tends to follow the euro's movements against the U.S. currency because Britain sells more than half its exports to 12 countries using the euro, and on speculation Britain may adopt the common currency in coming years, analysts said.