The pound rose to a six-week high against the euro amid concern political wrangling over a 10 billion-euro ($13 billion) bailout of Cyprus has undermined faith in Europe’s financial system.
Sterling extended two weeks of gain versus the common currency as Reuters reported Dutch Finance Minister Jeroen Dijsselbloem as saying the Cypriot rescue plan, which included losses for some bondholders and depositors, may become a template for euro-area bank bailouts. The pound was also supported as an U.K. industry report showed house prices rose this month. Gilts advanced, pushing 10-year yields to the lowest level this year.
“This is a negative euro effect,” said Jane Foley, a senior foreign-exchange strategist at Rabobank International in London. “People were already beginning to wonder if there was enough bad news priced in sterling. That speculation was already out there and then we’ve had this news from Cyprus.”