Sterling pushes past $1.39 amid vaccine optimism

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. For context, sterling was trading above $1.50 before the Brexit referendum in 2016.

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.

Prime Minister Boris Johnson is due to outline a route out of lockdown next Monday. He has already said the strategy will be "cautious but irreversible".

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."

Paul Dales, chief UK economist at Capital Economics, said: "A further improvement in global risk sentiment and a relative rise in UK interest rate expectations may mean the pound continues to strengthen, perhaps from $1.39 (€1.15) now to $1.45 (€1.16) this year. That would take the dollar/pound rate back to within a whisker of the level seen before the 2016 Brexit vote."