STERLING has hit a four-month high against a faltering dollar, with firmer UK economic indicators reining in foreign exchange players' expectations of further easing of monetary policy by the Bank of England.
The pound rose as high as $1.5734 during yesterday's session – its strongest level against the greenback since February. By 5pm in London, sterling had eased back to $1.5696, matching its Wednesday close. However, the pound has climbed sharply from levels of about $1.50 late last month.
Sterling's strength against the dollar has also been attributed by market players to growing doubts the US Federal Reserve will pare back its monetary stimulus for the world's largest economy in the short term.
The pound gained ground against the euro yesterday.
At 5pm, the euro was down 0.27p on its previous close in London at 84.82p. The single currency fell as far as 84.72p during trading, close to the three-week low against the pound that it recorded on Wednesday.
The pound's rise against the dollar and euro will make the US and eurozone destinations more affordable for people from Scotland and the rest of the UK who are visiting these countries. But it could crimp the competitiveness of exporters from Scotland and the rest of the UK in the US and eurozone.
In spite of the recent modest improvement in UK economic indicators, some commentators continue to highlight the scale of the challenges facing the country as it struggles to mount a convincing recovery five years after the onset of the Great Recession of 2008/09 amid severe fiscal austerity.
Brian Ashcroft, emeritus professor of economics at the University of Strathclyde, is among those who believe the Bank of England will likely ease UK monetary policy again later in the year in a further attempt to support activity.
Mr Ashcroft, presenting the Fraser of Allander Institute's latest economic commentary this week, said: "I suspect we will see a looser monetary policy towards the end of this year."
UK base rates have been at an all-time low of 0.5% since March 2009. The Bank has put in place a £375 billion quantitative easing (QE) programme.
QE is aimed at stimulating activity by boosting money supply through the purchase of Government and corporate bonds, using central bank reserves.
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