Sterling makes strong gains against the US dollar

The pound strengthened markedly against the US dollar yesterday, finishing the day at $1.5346.

• In early trading yesterday sterling climbed against the dollar, as London equity markets recovered from an initial 1% drop.
  
• Elsewhere, monthly figures from property group Rightmove aided sterling’s gains yesterday morning, as they showed asking prices in May rose by 2.4% in England and Wales, the biggest increase for the month since 2003.
  
• However, the group said it did not reflect a return to health of the country’s housing market, but rather a mixture of “ambition, optimism and necessity”. This capped sterling’s early gains to some extent.
  
• Strong performance by London equity markets yesterday afternoon drove sterling higher. Improved sentiment in the banking sector, following the decision of Lloyds Banking Group chairman Sir Victor Blank to retire next year, buoyed investor confidence that a global economic recovery was not too far off. As a result, many bought into the higher-yielding pound, moving away from the perceived safety of the dollar.
  
• In trading so far today the pound has continued its strong rise against the greenback, as general risk aversion in the market remains low.
  
• There are important economic releases due on both sides of the Atlantic today. In the UK, Consumer Price Index figures are out at 9.30 BST, while at 13.30 BST Building Permit data is due in the US.