Investment banks are turning more bullish on sterling as it trades close to a one-year high against the dollar and a five-month high against the euro, on expectations that the UK economy is performing better than many had feared.
The pound was trading at $1.2618 on Tuesday, close to the $1.2688 it hit on Monday, its highest level since April 2022. A euro bought £0.8698, sterling’s strongest level since mid-December.
Analysts believe that conditions are in place for the pound’s recovery to continue, after rising on a host of stronger than expected gross domestic product, manufacturing and jobs data this year, as well as a fall in the price of natural gas and broad weakness in the dollar.
“We are now taking an outright constructive stance,” said Goldman Sachs in a research note, expecting the pound to strengthen against other currencies including the euro.
“Essentially, we think that the same factors that acted as headwinds on sterling in 2022 — mostly natural gas…