Tuesday 1 June 2021 11:00 am

Pound retreats after hitting three-year high amid variant concerns

The pound retreated this morning after reaching a fresh three-year high versus the dollar amid economic recovery hopes.

Well into the London session after the bank holiday weekend, sterling reversed its course to fall 0.2 per cent to $1.4183.

The pound edged lower as concerns over a new coronavirus strain outweighed increasing investor optimism on the UK’s economic recovery.

Three-year high

Sterling touched its highest level since April 2018 of $1.4250 during the Asian session against the dollar.

Analysts attributed the rise to positive global investor sentiment towards Britain’s economic recovery.

“Overseas investor sentiment generally is positive towards sterling given the vaccine roll-out and the reopening of the domestic economy,” said Neil Jones, head of FX Sales at Mizuho Bank.

“The stage is set for the pound to push higher I would suggest.”

Optimism remains high

UK house prices jumped by an annual 10.9 per cent in May, the most in nearly seven years, mortgage lender Nationwide revealed this morning.

Jones said that the house price data, which surprised in the upside, helped to keep optimism around the British currency.

Economic indicators including retail sales and employment measures are also looking up, as well as a deluge of new orders driving a record increase in British manufacturing last month.

Sterling also found support from Bank of England policymaker Gertjan Vlieghe last week, who said the central bank was likely to raise rates only well into next year.