Sterling climbed to a one-year high this afternoon, nearing $1.35, as the dollar selloff continued and Brexit talks dragged.
The pound advanced beyond $1.3490, its best in a year after the “Boris bounce” which saw Conservatives won an 80-seat majority. Sterling rose 0.4 per cent against the euro to 90.22 pence.
“The moves are probably two-fold – one is clearly about dollar weakness with majors posting solid gains vs the buck,” said Neil Wilson, chief markets analyst at Markets.com.
The euro has risen to its strongest in over two and a half years against the dollar, rising above 1.2170, and there is “not a huge amount of resistance blocking a return to 1.25”, says Wilson.
The other driver is progress in the Brexit talks, although EU officials have said they are “within millimeters” of the limits of their negotiating mandate meaning the ball is now in London’s court.
“We know what overplaying Brexit headlines has been like but it feels like this time is different simply because we are running out of road,” said Wilson.
The surge against the dollar came after Irish foreign minister Simon Coveney claimed that “there’s a good chance we can get a deal across the line in the next few days”.
“With the deadline looming, sterling will take what it can get,” said Connor Campbell, financial analyst at Spreadex.
Despite the pound’s gains the FTSE did not dip into the red and closed 0.38 per cent higher.