BLBG:Pound Rises to One-Week High Versus Euro on Greece, BOE Minutes
The pound rose to the strongest in a week versus the euro as European finance ministers failed to agree on a debt-reduction package for Greece and as Bank of England policy makers questioned the impact of bond purchases.
Sterling held gains from yesterday versus the single currency after minutes of the central bank’s November meeting showed officials voted 8-1 to stop expanding the so-called quantitative-easing program this month. The majority said uncertainty among consumers and companies may be affecting the impact of the stimulus program on the economy. U.K. government bonds were little changed.
“We expect the pound to weaken against the dollar but outperform the euro,” said Michael Derks, chief strategist at FxPro Group Ltd. in London. “Greece remains a major problem and there will be a lot of nervousness ahead of the next meeting on Nov. 26. The pound should be well supported against the euro.”
The pound gained 0.1 percent to 80.41 pence per euro at 11:42 a.m. London time after appreciating to 80.06 pence, the strongest level since Nov. 14. The U.K. currency was little changed at $1.5921.
European Union finance ministers meeting in Brussels failed to agree on a deal to steer an extra 32.6 billion euros ($41.7 billion) to Greece over the next four years. They are also yet to find a way to tame the resulting increase in the nation’s debt, already the highest in Europe.
Miles Dissents
The minutes showed that Bank of England policy maker David Miles dissented from the majority on the Monetary Policy Committee, calling for a 25 billion-pound increase in the bond- purchase target to 400 billion pounds. The committee voted unanimously to keep its benchmark interest rate at a record low 0.5 percent and said it was “unlikely to reduce” it in the foreseeable future.
Sterling has gained 1.4 percent this year, according to Bloomberg Correlation-Weighted Indexes which track 10 developed- market currencies. The euro declined 2.6 percent and the dollar dropped 1.3 percent.
The U.K. budget deficit unexpectedly widened in October, a report showed today. The shortfall excluding government support for banks was 8.6 billion pounds compared with 5.9 billion pounds a year earlier, the Office for National Statistics said in London. The median of 25 estimates in a Bloomberg News survey was for a deficit of 6 billion pounds.
The benchmark 10-year gilt yielded 1.85 percent after rising seven basis points yesterday. The price of the 1.75 percent security due in September 2022 was at 99.07.
Gilts returned 2.5 percent this year through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bunds gained 3.6 percent and U.S. Treasuries earned 2.4 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
