The British Pound climbed to a three-week high against the US Dollar on Tuesday as the greenback remained under pressure following weaker-than-expected US employment data released last Thursday.
Sterling also touched its strongest level against the Euro in a year.
The currency briefly rose to $1.3401, its highest level since 17th June, before easing slightly to trade at $1.338.
The greenback reached a 13-month peak against a basket of major currencies in late June as investors ramped up expectations that the Federal Reserve would raise interest rates later this year, Reuters news agency reports.
However, the framework agreement between the United States and Iran triggered a sharp decline in oil prices, while Thursday’s weaker-than-expected nonfarm payrolls report, which showed slower job creation in June, prompted markets to scale back expectations for further rate hikes, weighing on the Dollar.
Meanwhile, Sterling remained near a 13-month high against the Euro, with the single currency edging lower to 85.41 pence on Tuesday.
Eurozone inflation came in below expectations in June, according to data released last week, prompting investors to scale back expectations for additional interest rate hikes by the European Central Bank.
Analysts said Sterling has also drawn support from the decline in oil prices, which had surged earlier this year amid the Iran conflict and raised concerns over the UK economy, given the country’s heavy reliance on imported energy and relatively limited gas storage capacity.
Furthermore, likely next prime minister Andy Burnham has also pledged to adhere to the government’s fiscal rules, easing investor concerns that the left-leaning former mayor of Greater Manchester could significantly increase public spending if he takes office.
Sterling’s unexpected resilience despite recent political uncertainty suggests that much of the negative sentiment had already been factored into the market.
Investors have spent years positioning for weaker UK economic performance, so as developments prove less severe than anticipated and economic fundamentals begin to improve, the Pound has started to find renewed support.