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Sterling heads towards highest since Brexit

Written by Business World, on 16th Apr 2018. Posted in World

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The pound pushed past the $1.43 mark on Monday and approached a post-Brexit referendum high as investor focus shifted to data that could cement expectations of a May interest rate increase and away from Britain's military intervention in Syria.

Britain struck Syria with cruise missiles on Saturday in partnership with Western allies, targeting chemical weapons facilities. But the military action did not appear to hurt risk appetite as bond yields rose and the dollar fell.

Sterling rose by 0.7% on Monday to $1.4332, its highest since January, as the currency continued a two-week rally against a broadly weak dollar.

Since Britain signed a transition agreement last month to cover the 21-month period after it leaves the European Union, concerns about Brexit have abated as investors focus on the state of the UK economy before an expected rate rise in May.

Crucial data on British unemployment, wages and inflation numbers are due this week and have the potential to boost sterling further.

Markets expect the Bank of England to raise interest rates by 25 basis points next month as it tries to curb inflation.

"With markets almost fully discounting a BoE rate hike, this week's run of monthly indicators are anticipated to give that hike a green light," Marc Ostwald, a global strategist at ADM Investor Services International in London, said in a note.

Yet some investors remain sceptical about expectations for policy tightening, citing lingering economic uncertainties.

They say it is mainly the broad weakness of the dollar, linked to a trade dispute between the United States and China, that is keeping sterling above $1.40.

Traders also pointed to the strong historical performance of the pound in April, when it tends to rise against the dollar as foreign companies hand more dividend payments to British shareholders.

Against the euro, sterling rose 0.2% to 86.47 pence , its highest against the single currency since late May 2017. (Reuters)

Source: www.businessworld.ie

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