Sterling set for good summer
THE pound is expected to continue to strengthen against both the dollar and euro this summer following last month’s rally, according to strategists.
May marked the pound’s strongest rise against the dollar since 1985, as sterling rose almost 10 per cent over the period. Investors bet the worst could be over for the global economy, prompting investors to ditch the safe haven dollar.
Last week, Travelex was offering $1.54 to the pound, the highest rate since November 2008, while the tourist rate for the euro climbed to a more modest EURO 1.11.
Sterling is now trading at its highest level since November last year against the dollar, a seven-month high, as investors begin to price in a worst fiscal position for the US, which like the UK will have to pay more to fund its huge domestic deficits.
Sterling’s lowest point against the dollar was in January – about 1.36 to the pound. But, with last week’s official figures revealing the situation for the US was as bad as the UK with GDP in the first quarter falling at a 5.7 per cent annual rate, investors are now shifting back out of the dollar into the pound.
At the same time, optimism over the UK economy has been boosted by a cluster of more positive data including Nationwide’s survey indicating that house prices managed a 1.2 per cent gain last month – only their second gain in the past year. The survey came just after CBI data showed growing optimism among retailers.