Pound Sterling has jumped due to a weaker US currency, improved UK economic outlook and the diminishing likelihood of a second Scottish independence referendum in the near future following last week’s elections in the country. But the surge in the pound will almost certainly have been helped by the UK’s speedy Covid vaccine programme – putting it way ahead of its European Union neighbours just a few months after Brexit was completed.
At 12pm, the British currency had risen to $1.4102 compared to $1.4000 at the previous close of business.
Versus the euro, sterling was at 0.8626 pounds compared to 0.8688 pounds at the previous close.
Other financial experts attributed the jump in the pound to the increasingly unlikely prospect of a Scottish independence referendum in the near future.
Nicola Sturgeon and the SNP convincingly came out on top in the Scottish election, but the party failed to gain an outright majority that would have seen the First Minister ramp up calls for another referendum.
Boris Johnson has continued to reject all demands for another public vote on the matter, insisting the focus must now be on successfully recovering from the damage caused by the coronavirus pandemic.
Ned Rumpeltin, head of European currency strategy at TD Securities, said: “The market has basically judged that she’s certainly not walking away with a very very strong mandate for an imminent referendum.”
The pound’s gains could also be attributed to a delayed reaction to the Bank of England increasing its forecast for the UK economy to grow at its most recent meeting last week.
In a positive outlook, the country’s central bank forecast the economy to grow by the most since World War Two this year.
ING FX strategists wrote in a note to clients: “We read the move as more of a legacy as the market is moving towards the Bank of England’s bullish set of UK forecasts and now greater confidence in the soft dollar environment.”
MUFG said in a note, “We do not expect the developments to materially alter our outlook for the pound to continue to trade at stronger levels this year supported by the robust UK cyclical recovery and vastly diminished Brexit risks.”
The pound started Monday firmly on the front foot, quickly breaking above the key $1.40 level for the first time in more than two months in early London trading.
At 7.25am, shortly after financial markets reopened for the week, the pound had jumped 0.5 percent against the dollar to $1.4055.
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Against the euro, sterling had surged 0.6 percent on the day at 86.415 pence per euro – its strongest since last Thursday.
Guido Fawkes’ Euro Guido Twitter account hit out at Remainers who had predicted chaos for the pound after Brexit.
They said: “£/$ hits high of1.41 this morning.
“Remainers said it would hit parity after Brexit and that Brexit backing hedge fund traders were going to make billions from shorting the pound.
“They claimed it was a deliberate policy to profit from ‘disaster capitalism’.”