London November 16 2022: The pound climbed to its strongest level in three months against the dollar, as fresh data added to evidence that the pace of price growth in the US may have peaked.
The UK currency jumped as much as 2.3% to $1.2028, breaching the psychologically important $1.20 level for the first time since mid-August. That took its advance to more than 4% this month.
“There has been a significant squeeze in short positions,” said Jeremy Stretch, head of G-10 currency strategy at CIBC. “Sterling tends to perform well in a risk-on environment, so that’s also benefiting it right now.”
Tuesday’s gains extend a steep recovery for the UK currency, which less than two months ago was sliding toward parity with the dollar and traded at a lifetime low of $1.0350.
Slower-than-forecast factory-gate inflation in the US, coming days after consumer price figures, are raising expectations that the Federal Reserve’s aggressive rate-hiking run may be nearing its end. Growing optimism around China is also curbing interest in the US currency as a haven investment, in turn offering relief for stocks and emerging-market assets.
Stretch said the pound may push further above $1.20 if UK inflation figures due on Wednesday show price pressures continuing to build. Beyond that, however, he sees the currency at risk of selling, as the government’s Autumn Statement on Thursday is likely to announce a raft of tax rises and spending cuts.
