The pound is enjoying its longest run of gains since before Britain voted to leave the European Union as data signal the economic consequences of the decision may be less dire than some analysts feared. Sterling climbed to its highest level in almost a month versus the dollar, extending its advance into a third week.
A report showing a gauge of UK construction rebounded last month more than economists forecast added to the sense of optimism, with the currency approaching the strongest level in four weeks against the euro. The pound jumped versus all its 31 major counterparts this week, bolstered by data that showed improvements in manufacturing output and household confidence.
The pound rose 0.5 per cent to $1.3328 in afternoon trading after touching $1.3341, the highest in a month. It’s gained 1.4 per cent this week, in the longest winning run since late April.
Sterling appreciated 0.1 per cent to 84.29 pence per euro, having reached 83.88 pence on Thursday, also the strongest level since early August.
Indications that the UK’s economic prospects outside the EU may not be as bleak as some analysts forecast are providing some support to the pound, which is still the worst-performing major currency since June 23rd, the day Britain voted to exit the world’s biggest trading bloc.
Still down
The currency extended its gains versus the dollar on Friday as a report showed US payrolls grew less in August than economists predicted.With terms of the exit still to be negotiated, the risk for pound bulls is that the current optimism turns out to be short-lived. Sterling is still down 10 per cent versus the dollar since the day of the EU referendum.
It was impossible to ignore the fact that the latest data releases were better than expected, said Roberto Mialich, a senior foreign-exchange strategist at UniCredit SpA in Milan. "We expect that the deterioration in the UK economy that hasn't been visible so far will be more evident in the coming months" and gains now present a "selling opportunity rather than the basis for a trend reversal", he said.
He is forecasting the pound will depreciate to $1.20 by year-end, a level not seen since 1985.
