Nov. 30 (Bloomberg) -- The pound fell to a five-week low against the euro amid speculation European officials are making progress in stemming the region’s debt crisis, damping demand for the relative safety of the U.K. currency.
Sterling headed for a fourth monthly decline versus the 17-nation euro as the German parliament approved the latest rescue package for Greece and a former European Central Bank Executive Board member said Spain may not need a bailout. The pound reversed an advance against the dollar as a report showed U.S. consumer spending unexpectedly stagnated in October in the wake of Hurricane Sandy. Gilts were little changed.
“The euro has had the upper hand this week thanks to improving sentiment,” Lee McDarby, head of dealing on the corporate and institutional treasury desk at Investec Bank Plc in London said, referring to the euro against the U.K. currency. “It’s ending the week in the driving seat.”
The U.K. currency dropped 0.3 percent to 81.19 pence per euro at 4:12 p.m. London time after depreciating to 81.33 pence, the weakest level since Oct. 24. The pound fell 0.1 percent to $1.6028 after climbing to $1.6063, the strongest since Nov. 2.
Legislators in Germany’s lower house of parliament, or Bundestag, today voted 473 in favor of the Greek aid package, while 100 voted no and 11 abstained.
German Finance Minister Wolfgang Schaeuble said crisis-fighting efforts were working as European leaders shepherded through a new package designed to ease terms for bailout aid for Greece and to help resolve the three-year-old debt crisis.
Spain may not require a bailout “if a sequence of good news is produced in terms of the deficit and other things,” former ECB board member Jose Manuel Gonzalez-Paramo said in an interview with Bloomberg Television in London yesterday.
The pound strengthened earlier versus the dollar after GfK NOP Ltd. said its index of U.K. sentiment improved to minus 22 this month, the highest reading since May 2011, from minus 30 in October. The median of 23 estimates in a Bloomberg survey was for an unchanged reading.
Sterling reversed its gains as U.S. Commerce Department figures showed purchases decreased 0.2 percent last month, the weakest reading since May, after a 0.8 percent gain in September. The median estimate of 79 economists surveyed by Bloomberg called for no change in so-called nominal sales.
Bank of England policy makers will maintain their asset-purchase target at 375 billion pounds when they meet on Dec. 5-6, according to all 36 economists in a Bloomberg survey. They last increased so-called quantitative easing in July, when they added 50 billion pounds.
Sterling has gained 1.2 percent this year, according to Bloomberg Correlation-Weighted Indexes which track 10 developed-market currencies. The euro declined 1.8 percent and the dollar fell 2.2 percent.
The 10-year gilt yield was at 1.77 percent after falling to 1.745 percent, the lowest level since Nov. 19. The 1.75 percent bond maturing in September 2022 traded at 99.94.
Gilts returned 3.5 percent this year through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bunds gained 3.8 percent and U.S. Treasuries earned 2.7 percent.
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