Sterling rose to two-month highs against the euro on Monday, driven by recent upbeat UK data and widening gaps between British and German government bond yields, Reuters reported. The yield gap between 10-year British gilts and comparable German bunds rose towards recent three year highs. The gap between the interest rate sensitive two-year gilts and German bond yields also picked up, giving the pound a boost. Sterling was also buoyed by prospects of merger and acquisition-related inflows after Vodafone, a British company, neared the sale of its 45 percent stake in Verizon Wireless to Verizon Communications for $130 billion. The euro, which posted its worst monthly performance in a year in August, was down 0.3 percent at 85 pence, having fallen to 84.85 pence earlier in the day, its lowest since July 3. Near term support is cited at its 200-day moving average of 84.81 pence. The pound was up 0.3 percent at $1.5550, extending gains from last month when it posted its biggest monthly gains since April. The pound rose last month as investors appeared sceptical whether the Bank of England will be able to keep rates near record lows given a recent uptick in economic activity.
