David Lamb, head of treasury services at No 1 Currency, says the US dollar has been “on the bank foot of late” due to rising Treasury yields and investors taking more risk.
The pound is now around $1.6660, which matches the highs at the end of last October (and compared to the low of $1.35 in January).
Lamb adds: “Manufacturing output data from the UK yesterday added to the increasing signs of recovery with the first rise in 14 months and, coming on the back of last week’s return to expansion in the PMI services index, led to calls that the recession is over from respected think-tank the National Institute of Economic and Social Research.”
Against the euro, the pound is trading at six-month highs and is almost 15 per cent above the historic €1.02 lows posted at the end of 2008.
“While it will likely be at least the end of the third quarter before an end to the recession can be officially announced and some Bank of England MPC members remain slightly more cautious, sterling looks well placed to extend this year’s gains with $1.70/$1.73 and €1.20/€1.22 against the dollar and euro respectively not out of the question in the weeks ahead,” Lamb says.