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U.K. Pound Advances Against Euro as BCC Revises Growth Outlook

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Aug. 30 (Bloomberg) -- The pound rose against the euro amid growing confidence that the U.K. will recover at a faster pace than other European economies struggling to contain their budget deficits.

Sterling gained for the third day in four against the 16-nation euro as the British Chambers of Commerce raised its growth forecast for 2010 and 2011. The U.K. bond market was closed today for a public holiday.

“Most of the economies worldwide aren’t recovery as quickly as central banks would like, but at least in the U.K. you don’t have the debt-crisis problem,” said Lutz Karpowitz, a currency strategist at Commerzbank AG, said by phone in Frankfurt. The pound’s gain today “is also part of a general weakness in the euro,” he said.

The pound appreciated 0.2 percent to 81.99 pence against the euro as of 4:01 p.m. in London, after earlier gaining as much as 0.7 percent, the most since Aug. 13. It was 0.4 percent weaker against the dollar at $1.5474.

The BCC raised its 2010 forecast for U.K. gross domestic product to 1.7 percent. Gains by the pound may be limited this week as other reports signal that economic growth will stall amid a slowing housing market and government spending cuts.

U.K. house prices slipped for a second month in August, with the average price in England and Wales falling 0.3 percent, Hometrack Ltd. said today. Prices declined 0.1 percent in July.

“There’s a lot of concern about the U.K. growth outlook,” said Niels Christensen, a currency strategist in Copenhagen at Nordea Bank AB. “We could see some weakening in the pound.”

To contact the reporter on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net

To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

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