The British pound strengthened its position on Wednesday because of rising market optimism after the United States and Japan reached a major trade agreement. The agreement between the U.S. and Japan eliminated new auto tariffs while providing $550 billion in Japanese investment and lending opportunities which boosted risk-sensitive assets.
The currency market showed renewed interest in global growth-related currencies which caused sterling to reach $1.3540 as its highest point since two weeks ago. The pound strengthened its position against the euro by 0.24% which caused the euro to drop to 86.62 pence.
The pound experienced a decline throughout July because of British fiscal concerns yet some experts predict a potential market recovery. Bank of America analysts predicted that macroeconomic conditions would improve which would lead to positive rate differentials for the British pound.
BofA strategists stated that markets have been too hasty in penalizing UK fiscal risks before obtaining complete evidence. The upcoming UK economic indicators especially business activity and retail sales will determine if a summer recovery exists.
