The pound posted strong gains against the US dollar yesterday as risk aversion eased

The pound reached a two-week high against the dollar yesterday, building on gains made last week, to close the day up 0.8% at $1.6486.

• The pound made strong gains against the greenback yesterday, finding support from stock markets which rose on speculation that the global recession is easing, sapping demand for the currency haven.
  
• Sterling found further support from July’s manufacturing production figure, which at 0.9% was a good improvement from the 0.4% reading in June and helped to bolster demand for the currency.
  
• Additionally, traders cited gold’s rally above $1000 per ounce as a source of broad downward pressure on the US currency.
  
• These cumulative effects allowed the pound to briefly climb over two cents, to a high of 1.6558, as investors bought back in to the UK recovery.
  
• The pound has continued to rally again this morning, breaking above the 1.6500 resistance level, as risk sentiment remains high.