“The pound advanced against the euro, paring a seventh monthly decline, as the Netherlands said it will breach European Union deficit limits, boosting demand for the U.K. currency as an alternative to euro-area assets.
Sterling strengthened for the first time in three days versus the dollar as the Dutch announcement signaled euro-area nations are struggling to grow fast enough to cut their debts. The pound is the worst-performing major currency this year amid speculation the Bank of England will add more monetary support to the economy. Demand was also limited after gross domestic product shrank last quarter and Moody’s Investors Service cut the nation’s Aaa rating last week.
“Sterling is going to pick up again as a safe haven as we see more worries about the euro region,” said Eimear Daly, a currency-market analyst at Monex Europe Ltd. in London. “People may also be thinking the U.K. situation isn’t as bad as they expected. I do see some more sterling strength coming back into the picture.”
The pound strengthened 0.4 percent to 86.36 pence per euro at 1:04 p.m. London time, trimming this month’s decline to 0.9 percent. Sterling fell to 88.15 pence on Feb. 25, the weakest level since October 2011. The U.K. currency rose 0.3 percent to $1.5207. It has still depreciated 4.1 percent in February.
Daly forecasts sterling will strengthen to $1.53 and 84 pence per euro by the end of March. The median estimates in Bloomberg surveys are for the currency to trade at $1.56 and 85 pence per euro.