LONDON: Sterling edged up against the dollar on Thursday, trading above the $1.41 mark as analysts remained positive on the currency’s prospects, although some warned its gains so far could prompt a bout of profit-taking.
The pound is the second-best performer among the G10 group of currencies year-to-date, up 3.5% against the US dollar.
Bets on a faster economic rebound in Britain, driven by its rapid vaccination programme have given the currency a boost, as has the Bank of England’s tapering of its asset purchases.
The most recent data shows an increase in long positions, meaning the market is betting the pound to gain more.
Data showing a doubling of inflation in April and a fall in unemployment in Britain has supported sterling this week. April retail sales data and May purchasing managers’ indexes are due Friday.
By 1527 GMT, sterling was 0.3% higher to the dollar at $1.4163. Against the euro, it was flat at 86.20 pence.
“We agree with investors taking a glass half-full approach to the UK economy and prospects for the pound,” ING strategists said in a note to clients. “We see Cable (sterling/dollar) in a tight $1.4090/4100 to $1.4150/60 range today.”
Earlier this week, Britain lifted a number of restrictions imposed to combat COVID-19, with cafes, bars and restaurants restarting indoor service and more international travel resuming.
Still, there is growing concern about the B.1.617.2 variant of the coronavirus, which British scientific advisers say will become dominant in the United Kingdom and is more transmissible than other variants.
“While the cyclical economic outlook still buoys the GBP, a pause in the pound’s rally is likely,” strategists at BCA Research said in a note. “The GBP is extended against both the euro and the USD, and a tactical correction prompted by profit-taking is set to take place.”