Sterling shot up to another near-two-year high against the euro overnight, easily beating recent records. It follows a strong showing from the Eurosceptic, right-wing populist parties in the European Parliamentary elections. This has also prompted President Macron to call a snap election to the French parliament.
The pound is now well over 1.5% stronger than a month ago and 4% above the average of the past five years against the euro.
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A report on a robust US employment market on Friday suggested that the US Federal Reserve might not lower interest rates as early as expected. This, the markets may have felt, offers cover for Bank of England policymakers also to keep rates higher for longer (which has, after all, been their mantra for some time), which would support the pound.
Will sterling stay there? With a large Labour majority probably now priced in, this growth may have run its course. There are some serious threats to the pound this week. The UK’s unemployment and earnings data will be out tomorrow morning, and then Gross Domestic Product (GDP) on Wednesday.
There is also the not insignificant matter of the US inflation data and Fed’s interest rate decision on Wednesday.
