Pound hits 33-month high over $1.39 as Covid vaccine optimism lifts markets –

The US dollar has dipped broadly in the markets, hitting a two-week low against a basket of currencies.

Optimism about COVID-19 vaccine rollouts, and the prospect of more US stimulus measures, pushed investors into riskier assets and out of the dollar.

Analysts at MUFG predict further dollar weakness ahead, which indicates the pound could have further to rally.

“We believe there is plenty yet to go in the so-called ‘reflation trade’ with market participants under-estimating the willingness of global policymakers to let the economy run hot and fuel stronger-than-expected global growth through the remainder of the year.

Here’s our news story on Jaguar Land Rover’s electric car push:

At $1.39 against the US dollar, the pound is still rather weaker than before the Brexit vote in 2016 – when it was worth almost $1.50.

But Paul Dales of Capital Economics argues that sterling could close that gap and rally to $1.45 this year, as the threat of negative interest rates diminishes.

He believes improving global risk sentiment should also boost the stock market, telling clients:

UK assets are well placed to shake off their underperformance since the 2016 Brexit vote by outperforming global assets over the next couple of years. All risky assets will continue to be buoyed by the combination of a rapid global economic recovery from the COVID-19 crisis and global central banks running ultra-loose policy for many more years.

But the UK’s more favourable valuations and its greater exposure to the sectors that are likely to benefit most from the recovery, such as consumer-facing, energy and financial, suggests that equities in the UK will rebound more rapidly than elsewhere.

Overnight, mortgage lender Halifax has reported that demand for detached houses in the UK has boomed during the coronavirus pandemic.

Buyers paid an average price of £486,595 for a detached property in December, 10% more than in December 2019, amid a scramble for more space to make home-working and schooling easier.

The pound’s rally comes on the 50th anniversary of decimalisation.

That was the day when the UK abandoned the complicated mix of tanners, shillings and florins in favour of today’s simpler system based on 100 pennies in the pound.

The new 1/2p, 1p, 2p, 5p, 10p and 50p coins were designed by sculptor Christopher Ironside, whose daughter Kate has written a fascinating thread about the process: