The pound pushed higher today and was on track for its third consecutive week of gains against the dollar after upbeat economic data lifted hopes for the UK’s post-pandemic recovery.
New figures released this morning showed UK business activity expanded at its fastest rate since 1998 in May as the lifting of lockdown restrictions boosted trade.
Separate data showed retail sales leapt 9.2 per cent in April as shops reopened. Compared with April 2020 – at the height of the first Covid-19 lockdown – sales were up 43 per cent and still up 9.9 per cent compared with the last month of trading before the Covid-19 pandemic hit.
Sterling strengthened through the morning following the positive updates, rising 0.3 per cent to hit $1.422. This puts the pound within reach of its recent peak of $1.424 in February.
Versus the euro, the pound also rose 0.3 per cent to 85.945 pence.
Sterling pushed past the key $1.42 mark on Tuesday for the first time since February, boosted by a combination of a weaker dollar and optimism about the UK’s economic recovery.
This came after the latest significant step in the country’s easing of lockdown measures, with indoor hospitality and international travel resuming from Monday.
Despite the positive movement Simon Harvey, senior FX market analyst at Monex Europe, warned there was a “high bar” for UK economic data to clear before a large impact was felt on the pound.
“Much of the initial rebound due to lockdown measures easing has been priced into UK financial assets over the course of the last month, meaning a more definitive trend is needed to highlight the strength of the economic recovery in the eyes of markets,” he said.
Traders will also have a close eye on rising inflation amid concerns it could lead the Bank of England to tighten its monetary policy.