Broad dollar weakness and an increase in demand for sterling has pushed the price back near $1.63

Sterling achieved a three-week high of 1.6297 against the dollar yesterday, supported by upbeat comments about the UK economy.

  • The pound jumped nearly three cents, or 1.8%, against the dollar on speculation that policy makers will pause their asset-purchase programme next month as the economy shows signs of recovering from the recession.
  • The Financial Times cited Bank of England Markets Director Paul Fisher as saying that the asset purchases scheme may be paused to give the central bank the option “of doing more later.”
  • Analysts suggested that it appeared that the Bank of England was letting it be known in more forceful terms that it is not talking the pound down any longer.
  • Additionally, the pound benefited from broad dollar weakness as optimism about the global economy and buoyant earnings from Goldman Sachs and Citigroup encouraged investors to move into currencies seen as being higher risk.
  • Data also revealed that US jobless claims dropped by another 10K week-on-week, and that the inflation figure increased to 0.2%, both of which beat market expectations, lessening demand for the haven currency.