The pound rose against the euro amid speculation Britain’s financial institutions may be able to weather the worst of the financial turmoil better than their counterparts in the single-currency region. Debt levels at German banks will blow up “like a grenade” unless they participate in a government plan to strengthen the financial system, Britain’s Daily Telegraph cited Jochen Sanio, president of the banking regulator, BaFin, as saying. The euro stayed lower versus the pound after a report showed European industrial orders declined for an eighth month in March. “The amount of bad news that’s priced into the pound quite considerably exceeds that priced into the euro,” said Michael Klawitter, a currency strategist in Frankfurt at Dresdner Kleinwort. “Sterling is being buoyed on concern there will be further bad news about German banks.” The pound strengthened 0.4 percent to 87.73 pence per euro as of 1:38 p.m. in London. It fell 0.3 percent to $1.5861. Industrial orders in the euro region fell 26.9 percent from a year earlier, after a revised 34.2 percent drop in February, the European Union’s statistics office in Luxembourg said today. Economists forecast a 30.6 percent annual decline, according to the median of eight estimates in a Bloomberg survey. From the prior month, March orders fell 0.8 percent. Gilts advanced as the FTSE 100 Index, a benchmark for stocks in Europe’s second-largest economy, fell 0.6 percent, stoking demand for the safety of government debt. The gains drove the yield on the two-year note six basis points lower to 0.99 percent. The 4.25 percent security due March 2011 climbed 0.09, or 90 pence per 1,000-pound ($1,579) face amount, to 105.74. Bond yields move inversely to prices.

Source