Sterling rose to an eight-week peak against the dollar on Monday, tracking euro/dollar higher as markets reassessed the chances of an August rate rise from the US Federal Reserve. A recent run of strong data from the UK has also supported sterling.
By 1407 GMT sterling was 0.1 percent stronger against the dollar at $1.8658, after easing off an earlier eight-week peak of $1.8686. Against the euro, sterling was steady at 68.40 pence. The dollar has come under pressure against most majors after weaker than forecast US growth data released on Friday dampened expectations of a US rate hike next week.
"Cable is pretty high and that reflects the generalised pressure on the dollar as markets re-price the outlook for US interest rates," Steven Pearson, chief currency strategist at Halifax Bank of Scotland Treasury services. Recent British data releases have been reasonably robust, including above forecast inflation and economic growth numbers. This has rekindled expectations for a rate hike in coming months.
Analysts polled by Reuters last week gave a median forecast of a 30 percent chance the BoE will raise interest rates from the current 4.5 percent when it meets on August 2-3. Seven of the 46 economists in the poll forecast a 25 basis point rate hike. Bank of England figures on Monday showed British mortgage approvals at their highest level in five months in June. Another survey by property consultant Hometrack showed British house prices climbing at their sharpest annual rate in 1-1/2 years in July. But the Bank of England figures also showed credit card lending saw its weakest gain since October 1994.