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The British pound hit its highest level against the dollar in almost three years, with global markets supported by hopes of a faster economic recovery from the coronavirus pandemic.
The British pound rose 0.5% to a 33-month high against the dollar on Monday, trading above $ 1.39 in global currency markets for the first time since 2018, while reaching also a nine-month high against the euro of nearly € 1.15.
Amid growing optimism among global investors in the face of an economic rebound from the crisis and rising commodity prices, the FTSE 100 closed 2.5% higher at 6756, marking the biggest daily gain in over of a month. The biggest gains were British Airways owner IAG, which climbed 7%, National Express, which rose 11%, and cruise line Carnival, which ended the day up 8%.
The positive figures came after more than 15 million people in Britain were offered their first coronavirus vaccine, and as Boris Johnson prepares to outline a roadmap next week to ease lockdown restrictions this spring. Britain’s Brexit deal, despite evidence of cross-border trade issues a month after it left, has also eased pressure on the currency.
Hopes of a rapid global rebound were underlined by the first Japanese stock index to hit its highest level in more than 30 years, after closing above 30,000 on Monday. The Nikkei 225 Index, which tracks the value of Japan’s largest companies, rose 1.9% to end the day at 30,084.15 amid the global rally in stocks. Wall Street was closed for Presidents’ Day.
The Nikkei broke the 30,000 mark after official figures showed Japan’s economy grew 3% in the last few months of 2020, stronger than expected, reflecting the speed of its rebound from the crisis. Japan’s gross domestic product (GDP) for the full year fell 4.8%, the worst performance since 2009, when the financial crisis shook the global economy.
It comes after the UK recorded a 9.9% drop in GDP last year, the worst performance among the wealthy group of G7 countries.
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Analysts said global markets started the week off on a high note, with investors remaining confident that disruption resulting from continued lockdowns in early 2021 would soon give way to an economic boom as restrictions were relaxed. Brent crude hit a 13-month high on Monday, hitting more than $ 63 a barrel, with tin hitting a seven-year high and copper an eight-year high.
However, concerns remain about the threat of new strains of coronavirus and the damage to businesses after a year of Covid disruption.
Russ Mold, chief investment officer at broker AJ Bell, said: “The confidence boost is a global story reflected in Japan’s Nikkei-225 hitting a 30-year high and Asian stocks in general posting big gains. The long-awaited American recovery contributes largely, with vaccines, to this positive mood. “
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