British pound extends relentless rally to multiyear highs amid hopes of economic recovery

Sterling has extended gains against both the US dollar and the euro this week amid news of the UK’s vaccination progress and hopes of economic reopening after strict pandemic lockdowns.

The UK currency topped $1.42 on Wednesday morning, marking its highest level against the greenback in almost three years, since April 2018. After last week’s surge, the British pound rose nearly 0.2 percent on Wednesday to bring its monthly gains against the dollar to around three percent.

The pound also gained against the common European currency, moving higher for a ninth consecutive session and spiking to a one-year peak of €1.17. If the currency keeps rising against the euro during Wednesday’s trading, it would mark its longest winning streak in five-and-a-half years, according to Bloomberg.

The rally was apparently fueled by vaccine optimism, as the Covid-19 vaccine rollout in the UK appeared to be going faster than in the rest of Europe. At the same time, there is optimism that the British economy may have a relatively strong 2021 after suffering an unprecedented slump last year due to the coronavirus outbreak.Earlier this week UK Prime Minister Boris Johnson revealed a plan to reopen the economy and gradually lift coronavirus restrictions over the next four months.

Analysts and banks are also bullish on sterling, especially in light of the Brexit deal. Banks upgraded their forecast for the currency, with Bank of America projecting the euro-pound pair to reach 0.88 instead of 0.94 by year-end.

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