Pound Halts Winning Streak as Greece Talks Fuel Pact Optimism

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The pound ended its longest winning streak in almost nine months versus the euro as European officials talked up the potential of an agreement this week to unlock aid for Greece, reducing the allure of U.K. assets as havens.

Sterling retreated from its strongest level this month against the shared currency as Dutch Finance Minister Jeroen Dijsselbloem, who chairs the meetings of his euro-area counterparts, said a plan presented by Greek Prime Minister Alexis Tsipras was “an opportunity to get a deal this week.” U.K. government bonds fell for the first time in three days.

“It isn’t actually D-Day after all and we still have got another couple of days,” said Kathleen Brooks, London-based European research director at Gain Capital Holdings Inc.’s Forex.com unit. “If we were to get a deal and Greece gets another bailout and everything is fine, then we could get a nice recovery. The weakness that we’ve seen in euro-sterling has all been Greek-related.”

The pound weakened 0.7 percent to 72.01 pence per euro as of 4:30 p.m. London time, having reached 71.26 pence on June 19, the strongest level this month. It gained in the nine days through the end of last week, the longest run since Sept. 26.

Sterling fell for the first time in seven days versus the dollar, dropping 0.4 percent to $1.5827.

A deal on Greece this week could push the euro toward its 100-day moving average versus the U.K. currency, Brooks said. The average was 72.63 pence based on data compiled by Bloomberg.

Greek bonds and shares rallied before a European Union leaders’ summit in Brussels on Monday.

Currency Returns

The pound is still up 1.2 percent in the past week, the best performer among 10 developed-nation currencies in Bloomberg Correlation-Weighted Indexes, as data showing that the economy is strengthening added to its haven appeal. The euro gained 0.7 percent, while the dollar fell 0.4 percent.

Benchmark 10-year gilt yields climbed 10 basis points, or 0.1 percentage point, to 2.10 percent, the highest level since June 11. The 5 percent bond due in March 2025 dropped 0.99, or 9.80 pounds per 1,000-pound face amount, to 125.325.

Germany’s 10-year bund yield jumped 14 basis points to 0.89 percent, while that on similar-maturity U.S. Treasuries increased 10 basis points to 2.36 percent.

“Essentially it’s all on the Greek story,” said Jason Simpson, a fixed-income strategist at Societe Generale SA in London. “We went home thinking it was all doom and gloom, and there seems to have been a change of heart and maybe there is a deal that’s achievable. That’s really what’s been driving the market.”