- Sterling climbs above the psychologically significant 1.40 level against the dollar.
- It first peaked above that level overnight, before retreating, but hit $US1.40 again at around 4.00 p.m. on Tuesday.
- The pound has rallied aggressively during 2018, and is the best performing G10 currency over the past six months.
LONDON – The pound moved to its highest level against the dollar since Britain voted to leave the European Union in June 2016 on Tuesday, climbing above the psychologically significant level of $US1.40 in the process.
By just after 4.00 p.m. GMT (11.00 a.m. ET) sterling has climbed to $US1.4020, a gain of 0.27%. The pound had briefly climbed above $US1.40 overnight, but slipped into the European morning and spent most of Tuesday hovering around $US1.3950.
Here’s the chart:
“The British Pound attracted most of the traders’ attention after breaking above $US1.4 earlier today. The 1.4 is not only a psychological level, but it has also been considered a key support level during the past three decades prior to the Brexit vote,” Hussein Sayed, chief market strategist at forex firm FXTM, said in an email on Tuesday morning.
While most analysts expected sterling to post gains during 2018, the speed at which it has appreciated early in the year has confounded expectations. The currency is up by almost five cents against the dollar since the beginning of the year, and is the best performing of the G10 basket of major currencies over the past six months.
It may seem as though sterling’s rise reflects growing confidence that the UK and EU will be able to strike a Brexit deal beneficial to both parties – and to a certain extent that is true. However, much of the appreciation is down to the continually weakening dollar as investors worry about the future direction of the US economy under the Trump presidency.
The recent government shutdown has only served to exacerbate those concerns.
Should weakness in the dollar continue, ING FX strategist Viraj Patel believes that sterling could reach $US1.53 this year, a level higher than the days before the referendum.
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