Pound at $1.42 on Wednesday before retreating

The pound reached $1.42 on Wednesday, building on the UK currency’s ongoing surge.

While Boris Johnson’s roadmap out of lockdown hardly inspired eagerness within investors, it appears to have laid the foundations for a positive outlook.

The pound edged past $1.411 yesterday, its highest level in nearly three years, in a show of continued optimism surrounding the UK economy.

Michael Brown, senior market analyst at CaxtonFX, pondered over the cause of the the pound’s movements against the dollar. 

“In something of a parabolic move, cable jumped above the 1.42 handle, testing the bottom of the aforementioned double-top region. The move, seemingly driven by significant GBP demand with little news behind it, confirms that region as the next key resistance,” Brown said. 

The pound also strengthened against the euro, up to €1.17, a one-year high, before falling back to €1.16. 

This follows a heavy fall in the value of the pound in the lead up to an anticipated ‘hard Brexit’ from the European Union.

Simon French, chief economist at Panmure Gordon, said: “Brexit has given international investors an excuse since 2016 to reduce their holdings in sterling. As the UK progresses through 2021 it is likely to see more stability in its relationship with the EU as adjustment frictions begin to dissipate. This should translate to a greater upside for the pound against the euro than than against the dollar in our view.

Labour data also emerged this week, surpassing expectations. The claimant count dropped by 20,000, again better than expected, in a “tentative” sign that the UK labour market market is stabilising, according to Jonathan Athow, deputy national statistician at the ONS commented.