BLBG:Pound Advances Against Euro as EU Officials Struggle With Debt-Crisis Plan
The pound strengthened against the euro as European officials attempting to craft a plan to end the region’s debt crisis struggled to resolve an impasse between its two largest economies.
Sterling headed for the first weekly gain in three weeks versus the shared currency as a weekend deadline for a solution to the euro-region’s debt woes was yesterday pushed back to Oct. 26 after Germany and France said the European Union needs more time to seal a “global and ambitious” accord. An index of British consumer sentiment slipped for a fourth month. U.K. government bonds fell as European stocks advanced.
“Euro-sterling will in time gradually grind lower on the back of escalating euro-zone sovereign debt tensions,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “The fundamentals in the U.K. are not as bad as Europe, but certainly still very weak.”
Sterling gained 0.2 percent to 87.11 pence per euro at 10:55 a.m. London time, having appreciated 0.7 percent this week. It was little changed versus the U.S. and Japanese currencies, buying $1.5810 and 121.27 yen.
The pound has weakened 1.3 percent in the past six months, according to Bloomberg Correlation-Weighted Indexes, which measure a basket of 10 developed-market currencies.
‘Poor’ U.K. Data
An index of consumer confidence slipped to 45 in September from 48 the previous month, the lowest since April, the Swindon, England-based Nationwide Building Society said today. A gauge of consumer expectations slipped to 62 from 65.
Britain’s budget deficit narrowed more than economists forecast in September, with net borrowing excluding support for banks falling to 14.1 billion pounds from 15.4 billion pounds a year earlier, the Office for National Statistics said in London today. A shortfall of 15 billion pounds was predicted by economists, based on the median of 17 forecasts in a Bloomberg
“Fundamentally speaking the data coming from the U.K. economy is poor so it’s not really giving any lift and the fact that the Bank of England engaged in more quantitative easing is a reflection of how poor the U.K. economy is,” said Peter Kinsella, a senior currency strategist at Commerzbank AG in London. “That means the outlook for the pound is quite poor.”
U.K. government bonds declined as the FTSE 100 Index added 0.7 percent and the Stoxx Europe 600 climbed 1 percent.
The 10-year gilt yield rose five basis points, or 0.05 percentage point, to 2.50 percent. The 3.75 percent security maturing September 2021 dropped 0.47, or 4.7 pounds per 1,000- pound face amount, to 110.84. The two-year yield was little changed at 0.59 percent.
U.K. government debt has returned 12 percent this year, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies, surpassing the 7.2 percent return for German bunds and 7.9 percent gain for U.S. Treasuries.
To contact the reporter on this story: Lucy Meakin in London at lmeakin1@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
