BLBG:Pound Rises From Two-Week Low Versus Euro on Debt-Crisis Outlook
The pound strengthened from a two- week low against the euro amid speculation this week’s declines were excessive given the U.K. has a better economic outlook than the single-currency region.
Sterling advanced for the first time in six days versus the 17-nation euro before European finance ministers meet next week to try to seek agreement on how to cut Greece’s debt levels. A report yesterday showed the euro-area economy sank into a recession for the second time in four years. U.K. government bonds were little changed.
“We expect sterling to continue to outperform the euro,” said Neil Jones, head of European hedge fund sales at Mizuho Corporate Bank Ltd. in London. “The outlook for the U.K. may not look brilliant but the euro region is in a recession. The U.K. has a comparative advantage over the euro region in the eyes of investors.”
The pound rose 0.4 percent to 80.23 pence per euro as of 9:57 a.m. London time after depreciating to 80.65 pence yesterday, the weakest level since Oct. 31. The U.K. currency was little changed at $1.5867 after dropping to $1.5829 yesterday, the lowest since Sept. 5.
Sterling has gained 1.4 percent this year, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-market currencies. The euro slumped 2.8 percent, and the dollar dropped 0.9 percent.
Greece Deficit
European officials have granted Greece an additional two years to reach budget-deficit goals in its bailout program. The region’s finance ministers will discuss ways to resolve the funding shortfall resulting from that extension at a Nov. 20 meeting in Brussels.
Bank of England policy makers maintained their bond-buying target at 375 billion pounds and kept the main interest rate at a record-low 0.5 percent on Nov. 8. While the central bank cut its growth outlook in its quarterly inflation report on Nov. 14, it raised its inflation projection.
“We face the rather unappealing combination of a subdued recovery with inflation remaining above target for a while,” Governor Mervyn King told reporters in London on Nov. 14. “The committee has not lost faith in asset purchases as a policy instrument, nor has it concluded that there will be no more purchases.”
The 10-year gilt yield was little changed at 1.73 percent. The 1.75 percent bond maturing in September 2022 was at 100.17.
Gilts returned 3.4 percent this year through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bunds gained 4 percent and U.S. Treasuries earned 2.8 percent.
To contact the reporter on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
