The pound rose versus the euro, reaching a three-week high, as reports added to evidence the U.K. economy is withstanding the stagnation that may lead to more monetary stimulus for its euro-area neighbors.
Sterling advanced against all but two of its 16 major peers this week as Chancellor of the Exchequer George Osborne upgraded the U.K.’s growth forecast for next year during his Dec. 3 Autumn Statement. A day later, the European Central Bank downgraded its forecasts for growth and inflation through 2016. Britain’s government bonds dropped as the government said the budget deficit would be bigger than it earlier estimated.
“The divergence trade, which has been a major part for euro-sterling, is still with us,” said Neil Jones, head of hedge-fund sales at Mizuho Bank Ltd. in London. “The trend is still for a weaker euro and stronger pound.”