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Pound Dollar exchange rate: Sterling near eight-month high but caution dominates as election and Brexit loom

Sterling cracked through the psychologically important $1.30 mark for the first time since late September last week

Josie Cox
Business Editor
Monday 22 May 2017 17:14 BST
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Despite the pound's resilience, strategists and investors are still displaying caution
Despite the pound's resilience, strategists and investors are still displaying caution (Reuters)

The pound continued to trade near an eight-month high against the US dollar on Monday, as political uncertainty showed no signs of loosening its grip on the US currency.

Late afternoon in London, sterling was trading just above $1.30, having cracked through that psychologically important mark for the first time since late September last week.

The dollar was trading slightly higher against a slew of currencies. Last week it slumped to its lowest level in six months, after reports that Donald Trump had asked former FBI Director James Comey to end an investigation into National Security Adviser Michael Flynn during an Oval Office visit back in February.

Despite the pound's relative resilience in recent days though, strategists and investors are still displaying caution ahead of the 8 June general election and as Brexit negotiations get under way.

Strategist at UniCredit wrote in a note on Monday that they still deem it too early to “turn sterling-bullish”. They said that the recent move above $1.30 “largely reflects a weak dollar rather than renewed confidence in the [pound]”.

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“Recent data releases suggest that as UK inflation is rising while nominal wage growth remains unchanged, domestic real incomes and real rates are being compressed, setting the stage for a more vivid divergence between the euro area and the UK over the next few months,” they write.

Because of that, they said that they still favour the euro over the pound.

Elsewhere on Monday, the FTSE 100 ended the session up 0.3 per cent.

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