LONDON: The pound rallied for the third straight session on Tuesday, touching a six-week high above $1.27 as market optimism over a potential coronavirus vaccine and an EU agreement on a recovery fund outweighed concerns about the UK economy.
The currency had enjoyed its best day in three weeks on Monday despite poor UK economic data and a lack of concrete progress on Brexit trade talks.
That rally continued as, aside from the EU recovery fund agreement, early data from trials of three potential Covid-19 vaccines showed promise.
"Generally, it's more about improvement in general risk sentiment. When you have risk-on in equities, the pound generally benefits," MUFG strategist Lee Hardman said.
A relatively bullish assessment of the British economy by Bank of England chief economist Andy Haldane could also be supporting the pound, Hardman added.
The currency rose as high as $1.2753, the highest since June 11, and by 1550 GMT it was trading at $1.2740, up 0.6% on the day. Sterling has gained 1.3% already this week.
Versus the euro, it firmed 0.3% at 90.24 pence, having earlier reached a one-week high.
Meanwhile data showed British government borrowing a record 127.9 billion pounds ($162 billion) in the first three months of the 2020/21 financial year - more than double the total for the whole year before.
June borrowing alone, excluding state-owned banks, was 35.5 billion pounds, five times higher than a year earlier.
A sale of 30-year government bonds also drew the lowest demand since March, continuing a recent pattern whereby investors accept record low yields for short-dated UK debt but are less keen on longer maturities.
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