British Pound Sterling firmed up on Thursday, January 25, to its highest levels on a trade-weighted basis since shortly after June 2016’s EU referendum, as optimism around Brexit and the economy continued to fuel a surge in the currency.
The pound is on track for its best month against the dollar in almost nine years, with a 6 percent climb since the start of the year taking it briefly over $1.43 on Thursday for the first time since the vote to leave the European Union.
Sterling was trading up 0.4 percent at $1.4288 by 1000 GMT, and was up 0.1 percent at 87.02 pence per euro.
The euro meanwhile slipped below 87 pence for the first time since June 2017 and the Bank of England’s trade-weighted sterling index touched its highest since June 30, 2016.
Until now much of sterling’s appreciation against the dollar has been attributed to broad weakness in the U.S. currency, but it has become clear this week that investors have become more bullish on the pound independently, Reuters reports.
Sterling’s latest rally began in earnest in mid-December, when May succeeded in securing a deal to move Brexit talks on to discussions of a transition deal and trade.
“It seems that for many people the two-year transition phase is a done deal, although that hasn’t been confirmed yet,” Foley added. “There’s also a fair amount of optimism about the trade solution for Brexit, which may prove misguided.”
The euro is itself benefiting from optimism around a strengthening economy and a central bank that is moving towards tighter monetary policy. Investors will be given fresh cues for the single currency when the European Central Bank wraps up a policy meeting later in the day.
