ECONOMY

Pound gains second day versus euro as Greece debt talks stall

The pound strengthened for a second day against the euro after European finance ministers failed to agree on a debt-reduction package for Greece.

Sterling dropped for the first time in five days against the dollar before the Bank of England publishes minutes of its meeting on Nov. 7-8 when it decided to pause a 375 billion-pound asset-purchase program aimed at boosting growth. Policy maker Martin Weale said late Tuesday that above-target U.K. inflation remains a concern and further stimulus may increase price pressures.

“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 into the meeting.”

The pound appreciated 0.2 percent to 80.30 pence per euro at 9:07 a.m. London time after reaching 80.06 pence, the strongest level since Nov. 14. Sterling fell 0.1 percent to $1.5911. It rose to $1.5936 on Tuesday, the most since Nov. 9.

In Brussels late Tuesday, European Union finance ministers failed to agree on a deal to steer an extra 32.6 billion euros 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.

Sterling has gained 1.5 percent this year, according to Bloomberg Correlation-Weighted Indexes which track 10 developed- market currencies. The euro declined 2.7 percent and the dollar dropped 1.1 percent.

U.K. government bonds were little changed before the Office for National Statistics publishes a public finances report at 9:30 a.m. The budget shortfall excluding government support for banks narrowed to 6 billion pounds from 12.8 billion pounds a year earlier, according to a median forecast by 25 economists in a Bloomberg News survey.

The yield on 10-year gilts was at 1.84 percent after rising 11 basis points in the past two days. It earlier touched 1.85 percent, the highest since Nov. 5. The price of the 1.75 percent security due in September 2022 was 99.17. Two-year note yields were also little changed at 0.28 percent.

Gilts returned 2.5 percent this year through Tuesday, 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.

[Bloomberg]