Pound sterling this morning climbed its highest since the start of the pandemic in March, nearly tipping over to $1.43, before falling back against the US dollar and euro.
One pound sterling was buying $1.429 and €1.164 overnight, before dipping again to $1.414 and €1.163 when London traders started their days.
The surge against the euro in particular marks positive bets from investors on the UK’s vaccine roll-out.
With thoughts that the successful roll-out will stimulate economic rebound, analysts have also suggested that the dodging of a ‘no-deal’ Brexit scenario has provided Britain some relief and boosted pound sterling to becoming the best performing G10 currency.
“Seemingly GBP is benefiting from a positive vaccine rollout and short-term Brexit adjustment problems disappearing, which also from a relative rates perspective is supporting GBP,” said Lars Sparresø Merklin, senior analyst at Danske Bank.
“That said, momentum seems stretched and EUR/GBP seems oversold based on our short-term models, and hence we may see short EUR/GBP take a breather from here,” he added.
The positive results arrive ahead of Bank of England (BoE) governor Andrew Bailey testifying before the parliament’s Treasury Committee later today.
The pound rallied against the dollar and the euro last month amid resistance from Bailey against negative interest rates.
Strategists have suggested that the strengthening of sterling has come from a repeat of last month’s push back as Bailey is set to testify, a day after his US counterpart testified to the Senate Banking Committee.
“Any reference to negative rates will, as usual, have a magnified market impact, but markets have now moved away from the negative interest rate policy narrative in the UK and some generic reference to openness to more monetary stimulus should fall short of revamping these expectations,” a note to clients from strategists at ING said.
“Any setback in the GBP rally – still fuelled by solid vaccination progress – should be short-lived.”