Sterling edges closer to year's high



© Reuters. FILE PHOTO: Pound and U.S. dollar banknotes are seen in this illustration taken January 6, 2020. REUTERS/Dado Ruvic/Illustration

LONDON (Reuters) – Britain’s pound neared its high for the year on Tuesday, boosted by expectations of further relaxation of social restrictions linked to the COVID-19 pandemic by the end of June.

Recent gains have seen sterling close in on a nearly three-year high of $1.4240, a level last reached in February.

The pound’s performance this year has been second only to the commodity-driven Canadian dollar among G10 currencies, buoyed by Britain’s fast rollout of vaccines that sparked hopes of its economy reopening.

The British currency’s recent rise against the dollar has also been supported by investor concerns that rising inflation in the U.S. could prompt interest rate increases.

British policymakers on Monday had adopted a relaxed tone about inflation, helping the pound to hold on to recent gains and setting expectations of a similar tone from the central bank’s interest rate-setter Silvana Tenreyro who speaks at 1600 GMT.

Bank of England Governor Andrew Bailey had said on Monday he does not see long-term implications from an expected pick-up in inflation.

By 0748 GMT sterling was up 0.25% on the day against the dollar at $1.4190 and flat to the euro.

With no major economic data due on Tuesday, analysts saw the positive momentum generated by recent vaccine news as the likely main driver for the pound.

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