The pound was poised to record its best week against the US dollar in seven years after gaining yet more ground on Friday (15 July), as the feel-good factor brought by the appointment of a new Prime Minister showed no sign of fading away.
On Thursday, the Bank of England's surprising decision to keep interest rates unchanged delivered an unexpected boost to the sterling, which continued its rally in the final session of the week. The pound momentarily relinquished some of its gains after BoE's rate-setter Andy Haldane urged the bank to implement strong stimulus policies next week, but quickly recovered and was trading higher against both the euro and the dollar by mid-afternoon.
The sterling was 0.26% higher against the former and 0.29% higher against the latter, exchanging hands at €1.2023 and $1.3380 respectively.
"Theresa May's appointment as prime minister has eased investors' concerns over persisting political uncertainties, whilst yesterday's surprise decision from the Bank of England not to reduce interest rates has also given the pound a lift," said Chris Saint, senior analyst at Hargreaves Lansdown currency service.
The pound has gained against all its 31 major peers this week and is heading for its best week against the dollar since 2009, but some economists warned the rally could soon peter out.
"Sentiment remains bearish towards the pound and the relief rally in the GBP-USD could be what bearish investors have been waiting for," warnedFXTM research analyst Lukman Otunuga.
Elsewhere, the dollar was little changed against the euro but extended its gains against the yen and was trading 0.64% higher against the Japanese currency to ¥106.02. Analysts warned that a positive US retail sales report – due out later on Friday – could heap further pressure on the yen.
Ilya Spivak, currency strategist at DailyFX, said:"An upbeat result may bolster global growth bets, adding to the appeal of higher-yielding currencies while further punishing the yen."