Friday 19 February 2021 12:26 pm

Sterling hits $1.40 for the first time in nearly three years

Sterling hit $1.40 against the dollar for the first time in nearly three years this morning on vaccine optimism and better than expected PMI readings. 

The UK’s PMI reading during the third lockdown showed the downturn was less severe than anticipated, pushing cable above the $1.40 mark for the first time in 34 months. 

“Although the data hint at a renewed contraction of the economy in the first quarter, business expectations for the year ahead improved to the highest for almost seven years, suggesting the economy is poised for recovery,” IHS Markit’s chief business economist, Chris Williamson, said.

Read more: UK PMIs: UK firms fare less badly than expected

Sterling’s strength in recent weeks is a sign of confidence in the vaccine rollout as well as the end of the Brexit uncertainty. 

“Investors are clearly responding well to the fact that daily new cases of COVID have fallen since the middle of January,” Bilal Hafeez, chief executive of Macro Hive said. “More importantly to Sterling’s rise is the fact that the UK has one of the most aggressive COVID vaccine rollouts in the world – putting it ahead of Germany, France and the US. Partly because of this, the Bank of England has been reluctant to embark on additional easing measures.”

The weakness of the dollar which slipped after disappointing jobs data is also helping the pound push higher. 

The pound has soared this year with analysts predicting it to push even higher. “We would anticipate further strengthening of GBP/USD over the course of this year. It is not beyond the realms of possibility that Sterling could move to 1.50 by the end of 2021,” Hafeez said.

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