Nov. 16 (Bloomberg) -- 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 seek agreement on how to cut Greece’s debt levels. A report yesterday showed the euro-area economy sank into recession for the second time in four years. U.K. gilts 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 0.5 percent to 80.15 pence per euro at 4:43 p.m. London time after depreciating to 80.65 pence yesterday, the weakest level since Oct. 31. The U.K. currency was little changed at $1.5855 after dropping to $1.5829 yesterday, the lowest since Sept. 5.
Sterling has gained 1.6 percent this year, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-market currencies. The euro slumped 2.8 percent and the dollar slid 0.6 percent.
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.
The Bank of England cut its growth outlook in its quarterly inflation report and raised its inflation projection on Nov. 14, a day after the Office for National Statistics data showed consumer prices rose 2.7 percent in October from a year earlier, the fastest since May.
The 10-year gilt yield fell one basis point, or 0.01 percentage point, to 1.73 percent. The price of the 1.75 percent bond maturing in September 2022 rose 0.07, or 70 pence per 1,000-pound face amount, to 100.22. Two-year yields were little changed at 0.24 percent.
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.
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