Wednesday 10 February 2021 12:36 pm

Pound sterling touches three-year high against US dollar at $1.38 on vaccine success

Pound sterling pushed toward $1.40 today, after it broke past the $1.38 on the back progress on the UK’s Covid-19 vaccine rollout and a weaker US dollar.

Demand for safe havens, such as the US dollar, has declined in recent weeks as the number of Covid-19 vaccinations surpassed the total number of people infected with the virus.

Read more: Financial markets continue to hang on two Vs: vaccine and virus

The pound has had moemntum in recent few weeks in line with the UK’s vaccination roll-out, whileuncertaintly around the Brexit deal which has haunted it for years has also been somewhat removed.

At lunchtime pound sterling was buying $1.383 and €1.142, both up around 0.2 per cent.

“GBP bulls have been flexing their muscles since the start of the year based on relief about the EU/UK trade deal and on hopes that the relatively rapid vaccine roll-out program will lead to a fairly fast economic recovery this year,” said Jane Foley, head of FX strategy at Rabobank.

Read more: Pound sterling at highest point against the US dollar in 2.5 years

Pound sterling is boostet from the Bank of England’s upbeat forecast that the UK economy will regain its pre-pandemic size by the first quarter of 2022.

“The UK’s advanced vaccination rates may also start to show its impact in health outcomes and that certainly will strengthen the BOE’s current relatively optimistic case,” said Geoffrey Yu, senior EMEA market strategist at BNY Mellon.

BoE’s decision to give banks at least six months warning to prepare for the possible introduction of negative interest rates led money markets to push forward expectations of a rate cut to March 2022 from August 2021.