EUR/GBP at 0.7920 on Widening Inflation Gap

The pound headed for a weekly gain versus the euro as reports strengthened speculation that the U.K. economy is recovering fast enough to withstand tighter monetary policy while European economies require more stimulus.

U.K. inflation accelerated last month toward the Bank of England’s 2 percent target while price increases in the euro area were less than half the European Central Bank’s goal, reports showed this week. Sterling fell for a third day against the dollar. Government bonds were little changed as waning concern that the shooting down of an airliner yesterday would escalate the Ukraine crisis damped demand for haven assets.

“The U.K. is just coasting toward monetary tightening, things are going very well,” said Neil Mellor, a currency strategist at Bank of New York Mellon in London. “There are only so many yield plays available and the pound by virtue of its fundamentals is one of them. The obvious one to buy it against is the euro.”


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