LONDON: Sterling set a fresh 2-1/2 year high against the dollar and a new 8-month high against the euro on Thursday on hopes that Britain's brisk pace of COVID-19 vaccinations would lead to a relatively quick rebound in economic growth.

With a Brexit deal in the bag, Britain's lead in vaccinations, along with lowered expectations of negative interest rates from the Bank of England, has boosted the pound against the euro.

The pound is up 1.2% against the single currency this year, and 0.7% this week. Speculators increased their long positions on the pound last week to their highest since September last year.

By 1543 GMT, sterling was up 0.5% against the dollar, having hit a fresh 2-1/2 year high of $1.3745.

Against the euro, it hit a new high of 88.30 pence, its highest since May 2020. ING said it expected sterling to gain to 88 pence per euro.

"If you look at the current status of the vaccination process, the UK is leading here in Europe and it's also still vaccinating at a faster pace than in most of the big EU countries," said Mikael Milhøj, senior analyst at Danske Bank.

"Also, you can see that the support for getting vaccinated in the UK is much higher than in Germany, Italy, Spain and especially of course in France. And that means that the UK economy may exit this COVID-19 crisis before the rest of Europe does and that I believe should have a positive impact on sterling."