Greek Crisis Drives Pound to Best Run Against Euro Since March – Bloomberg

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 all but two of its 16 major currency counterparts and was set for its sixth day of gains versus 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. A measure of anticipated price swings in euro-sterling touched its highest level in five weeks.

"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 0.6 percent to 71.92 pence per euro at 2:58 p.m. London time. It reached 71.76 pence earlier, its strongest level against the euro since June 1. It was set for a sixth daily gain, which would be its longest run since March 11.

Against the dollar, the pound rose 0.2 percent to $ 1.5638. 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.

Implied one-month volatility in sterling versus the euro touched 11.98 percent on Tuesday, the highest since May 7, data compiled by Bloomberg showed.

Developments outside Britain, such as the impasse in Greek debt talks in Europe, have overshadowed domestic economic data in dictating much of sterling's moves.

"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.

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."