Greek Crisis Drives Pound to Best Run Against Euro Since March

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The pound erased its earlier losses against the dollar and headed for its longest run of gains in three months versus the euro, as investors sought refuge in the British currency as Greece’s bailout talks remained stalled.

Sterling strengthened against 14 of its 16 major currency counterparts and gained for a sixth day on the euro. With the standoff between Greece and its creditors pushing it closer to a default, investors chose the pound’s relative safety. The support built even as U.K. economic data failed to signal a sustained recovery.

“In the very near term, sterling is going to remain strong as it is going to be bid from what is happening in Greece,” said Eimear Daly, a currency strategist at Standard Chartered Plc in London. “It has had a safe-haven complex and right now is the perfect timing for it to kick in.”

Sterling appreciated 0.7 percent to 71.86 pence per euro at 5:03 p.m. London time. It reached 71.76 pence earlier, the strongest level against the common currency since June 1. All that helped drive a measure of its anticipated price swings to the highest level in five weeks.

Against the dollar, the pound rose 0.2 percent to $1.5634. It recovered from weakening earlier after U.K. core inflation fell short of analysts’ estimates, and a separate report highlighted a slowdown in house-price growth.

Pound Swings

Implied one-month volatility in sterling versus the euro fell 23 basis points, or 0.23 percentage point, to 11.4 percent, having earlier touched 11.98 percent on Tuesday, the highest since May 7, data compiled by Bloomberg showed.

“I don’t think U.K. data had any major impact on sterling today as there are other themes in the market that have more importance,” said Richard Falkenhall, senior currency strategist at SEB AB in Stockholm.

Benchmark 10-year government bonds yields fell four basis points to 1.99 percent. The 5 percent gilt due in March 2025 rose 0.35, or 3.50 pounds per 1,000-pound face amount, to 126.51.

The U.K. Debt Management Office has set the coupon for the index-linked gilt due in 2046 being sold in the week starting June 22 at 0.125 percent, it said it a statement on Tuesday.

Britain releases a report on Wednesday which is forecast to show a pick-up in wage growth. The Bank of England also releases the minutes of its June meeting that could provide further hints on the timing and pace of interest-rate increases.

“Wage data for the U.K. labor market is really going to be key,” Standard Chartered Plc’s Daly said. “We see increasing wage pressures and that is going to reinforce expectations for policy tightening.”

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