The pound continued to strengthen against the US dollar yesterday, rising 2.79 cents (1.8%) to finish the day at $1.5754.
• In early trading, sterling resumed its rise against the greenback as risk aversion in the market continued to diminish, prompting investors toward riskier assets.
• The pound continued its climb following the release of Bank of England minutes. They showed the MPC unanimously agreed to expand the bank’s asset purchase program by a further £50 billion, although a £75 billion extension was discussed. The fact there were no unpleasant surprises was greeted with relief on the markets.
• Meanwhile, figures released by the Confederation of British Industry showed UK manufacturing orders fell slightly more than expected last month but firms were more upbeat about the future than at any time since last September. This news further extended sterling’s gains.
• A move beyond sterling’s 200-day moving average of $1.5550 – a key technical level – further extended its gains yesterday afternoon.
• Finally, in late trading, comments from US Treasury secretary Tim Geithner that the financial system was “starting to heal” after a period of severe trauma further increased investor appetite for riskier currencies like the pound. His announcement boosted confidence that the worst of recession had passed, tempering safe-haven demand for the dollar.
• The pound has risen 5.6% against the greenback so far this month, leaving it on course for its biggest monthly rise since 1993.
• The pound’s rise has continued in trading so far today as general risk aversion continues to wane in the market.
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