European Stock Markets
Sterling settled above the $1.43 line for the first time since the June
2016’s EU referendum as optimism around Brexit and growing expectations
of an interest rate increase later this year encouraged investors to add
to long positions.
A deepening selloff in the dollar also lifted the British pound, with a trade-weighted index trading at its highest level since end-June 2016.
The pound rallied more than half a percent against the dollar to a high of $1.4346 before stabilising around the $1.43 line.
It is on track for its best month against the dollar in almost nine years, with a 6 percent climb so far in January.
The euro also 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.
Data published last Friday showed speculators increased their net-long positions on sterling -- or bets that it would rise -- to the highest level in 3-1/2 years in the latest week, and that trend shows no sign of having abated.
But some analysts pointed out that further gains may be tough for the British currency.
French President Emmanuel Macron, for example, said last weekend that Britain would be able to have a bespoke deal with the trading bloc -- one of Prime Minister Theresa May’s objectives -- although he also said London’s financial centre could not enjoy the same level of access to the EU under May’s current Brexit plan.
But some fear that so much optimism may prove misplaced.
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.
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.
A deepening selloff in the dollar also lifted the British pound, with a trade-weighted index trading at its highest level since end-June 2016.
The pound rallied more than half a percent against the dollar to a high of $1.4346 before stabilising around the $1.43 line.
It is on track for its best month against the dollar in almost nine years, with a 6 percent climb so far in January.
The euro also 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.
Data published last Friday showed speculators increased their net-long positions on sterling -- or bets that it would rise -- to the highest level in 3-1/2 years in the latest week, and that trend shows no sign of having abated.
But some analysts pointed out that further gains may be tough for the British currency.
French President Emmanuel Macron, for example, said last weekend that Britain would be able to have a bespoke deal with the trading bloc -- one of Prime Minister Theresa May’s objectives -- although he also said London’s financial centre could not enjoy the same level of access to the EU under May’s current Brexit plan.
But some fear that so much optimism may prove misplaced.
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.
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.
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