Today, the pound hit a new high against the US dollar since its post-Brexit-vote crash, with traders proceeding to jump on the bandwagon at the beginning of the year.
Sterling grew by about 0.7 percent to reach intraday highs amounting to $1.3970 against the greenback while reaching a five-week peak against the euro.
The rally of the pound against the dollar over the past 12 months has come against a backdrop of a reasonably resilient economy of Britain, in spite of sharp real wage drops, and a widespread sell-off in the dollar.
However, the immediate trigger for the gains that were observed today was not clear. A forex strategist at ING, Viraj Patel, said that he is “slightly surprised” by the rate at which the pound has improved towards $1.40, a level that they predicted it would enter by the end of the first quarter of 2018.
“We do think there is more upside potential for the pound in 2018 – but for the next wave of appreciation to kick in, we’ll require a positive pound-specific catalyst,” said Patel.
Patel added that two such catalysts for more upward movement could be an improvement in the economic data of the United Kingdom and an agreement regarding a Brexit transition deal.
The managing director at payments firm Eiger FX, Peter Ashton, stated: “Momentum appears to be the prime factor behind sterling’s gains as there is little by the way of news to explain the rally.”
The market analyst at spread-betting firm City Index, Ken Odeluga, said that the pound might have been offered some extra impetus after breaking through a symbolic level hit last February 2016, the beginning of a rally prior to the EU referendum in June 2016.