Sterling pushed past the $1.39 level on Monday for the first time in nearly three years, boosted by optimism over the vaccine rollout.
At 1140 GMT, the pound was up 0.4% against the greenback at 1.3908, underpinned by dollar weakness and hopes that the swift vaccine rollout will mean a return to more normal life by spring.
The UK government has now hit its 15 February vaccination target, with more than 15 million people having been given the first dose of a vaccine.
CMC Markets analyst David Madden said: “It is not only good news from a health point of view, it also puts the country in a strong position with respect to re-opening the economy in the next few weeks and months.”
IING said: “We expect the encouraging vaccination figures in the UK to keep providing help to GBP in the coming months, and therefore see GBP experience further increases in net long positions.
“Despite GBP net longs appearing overstretched when compared to the past two years, remember that GBP no longer has to discount Brexit-related uncertainty, which had generally put a cap on GBP bullish sentiment.”
Rabobank struck a more cautious note. It pointed out that sterling has been one of the better-performing G10 currencies so far this year, supported by optimism on the economic outlook thanks to the UK’s rapid vaccine rollout and relief that Brexit is finally complete.
However, it warned that on both counts, “the outlook it still littered with pitfalls”.
“Brexit is casting long shadows in particular with respect to issues concerning Northern Ireland and the UK’s new relationship with the EU has not started well. On top of that, UK politics could be rocked by the Scottish elections in May which look set to bring strengthened calls for Scottish independence.
“On the economy, last November’s pledge by PM Johnson that ‘things will look different by Easter’ is beginning to appear optimistic. Despite the fast vaccine roll-out, mixed messages from ministers hint that some restrictions may remain in place for longer than expected.”
