Sterling has been on a roll since the release of the optimistic U.S. Non-farm payroll report. The news that job creation increased by more than was forecasted alleviated fears about the U.S. heading back into a recession.
This improvement in risk sentiment shifted investors away from safe havens into riskier assets, which helped Sterling surge against the dollar, to 1.6395 in New York trading from an Asian session low of 1.6226.
The Pound also gained against the euro immediately after the news, sending EURGBP to the lowest level since May 27, touching a low of 0.8641 from a high of 0.8709.
However, there is speculation that further gains in the British currency could run out of momentum by next week depending on the growth forecast of the Bank of England in its quarterly inflation report due on Wednesday August 10.
“Weaker growth ahead while inflation remains uncomfortably high this year could make the ambitious government fiscal austerity plan look difficult to achieve,” CitiFX analyst Valentin Marinov said in a note.
“In addition, abating inflation pressures against the background of slowing global growth could maintain speculation for more BoE accommodation ahead.”