The pound has perked up. Last week it jumped to $1.43, the highest level since the referendum on leaving the EU (before which it hit $1.49). On a trade-weighted basis it has strengthened to a level last seen in late June 2016.
The recovery is partly a question of dollar weakness, but investors have also “become more bullish on the pound independently”, says Jemima Kelly on Reuters. Speculators’ bets on further sterling gains are at a three-and-a-half-year high. Unexpectedly strong recent data has brought forward the prospect of further interest-rate rises. Employment has climbed to a new record, while GDP grew by 0.5% in the final quarter of 2017.
There is also a growing sense that Brexit may not be that bad after all. There is good news for equity investors too, says Lex in the Financial Times. The FTSE 100’s post-referendum jump was based on a weaker pound boosting the value of overseas earnings; the blue chips make over 70% of their sales abroad. But the strong equity-market rally shouldn’t melt away just because sterling has recovered.
Higher global growth and rising commodity prices are offsetting the trend, while sterling hasn’t bounced against every currency: it is still 12% down against the euro since the vote.