LONDON: Sterling hit a seven-week high against the euro on Wednesday, building on gains during the previous session when the Bank of England’s governor dismissed negative rates, while optimism over the pace of Britain’s vaccination rollout also offered support.

With the economy facing a third national lockdown, Governor Andrew Bailey said there were “lots of issues” with cutting interest rates below zero, which could hurt banks and potentially reduce their lending to companies.

Sterling was up 0.3% against euro at 89.05 pence by 11.51 GMT, after earlier trading at 88.97 pence, its strongest level against the single currency since Nov. 25.

“Markets adjusting to Bailey rolling back views on monetary policy is a driver. Secondly, the UK is pulling ahead on vaccinations so this has shifted the UK economic underperformance narrative a bit,” said Geoffrey Yu, senior EMEA market strategist at BNY Mellon.

Against the dollar, the pound flattened to $1.3667, after briefly touching a nine-day high of $1.37.

Following the completion of a Brexit trade deal in December, investors have turned their attention to Britain’s economy and its COVID-19 vaccination campaign.—Reuters