Sterling hit $1.40 against the dollar for first time in nearly three years today, as analysts bet the UK's quick pace of vaccinations will lead to an economic rebound from the country's worst crash in output in 300 years.
The pound hit $1.4005 against the dollar this morning, up 0.2% on the day - the highest level since April 2018.
The pound is the best performing G10 currency this year, up 2.3% against the dollar as investors bet that Britain's quicker pace of vaccinations will lead to a recovery from the worst annual fall in economic output in three centuries.
It has also recently gained over 3% against the euro.
Analysts attributted the single currency's weakness to the pound as reflective of other European countries' relatively slower vaccine rollout. It traded 0.16% lower to the euro at 86.65 pence today.
UK Prime Minister Boris Johnson on Monday is expected to announce the government's next steps in fighting the coronavirus, which may include plans to take Britain out of its third national lockdown.
Analysts said Britain's path towards lifting national lockdowns would be key for the currency going forward.
"Given how much of sterling's recent move is based on the market assuming that the UK's sterling pace of vaccination will allow a rapid 'unlocking' of the economy, next Monday’s Prime Ministerial address outlining the road out of lockdown will be closely watched; and may pose a downside risk for sterling if more cautious than the market is expecting," said Michael Brown, senior market analyst at Caxton FX.
British retail sales tumbled in January as non-essential shops went back into lockdown, official data showed today.
But lower-than-expected public borrowing offered at least some relief to finance minister Rishi Sunak as he prepares a budget plan.
Retail sales volumes slumped by 8.2% compared with December, a far bigger fall than the 2.5% decrease forecast in a Reuters poll of economists and the second largest on record.
