Pound Breaks $1.26 for First Time Since February as Dollar Drops

  • Risks still to the downside for pound: Banco Santander
  • U.K.’s May prepares to trigger Article 50 on Wednesday

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The pound broke above $1.26 for the first time in nearly two months, driven mainly by a weaker dollar, as doubts grow on whether U.S. President Donald Trump can implement his economic agenda.

Sterling strengthened against most of its Group-of-10 peers, but further upside might be limited given the political uncertainties surrounding Britain’s exit from the European Union, analysts said. Prime Minister Theresa May is set to start the process officially on Wednesday with the triggering of Article 50.

“What’s happening at the moment is that the dollar is weak as people rethink the Trump trade,” said Stuart Bennett, head of G-10 currency strategy at Banco Santander SA in London. While the pound is still “very cheap” relative to fundamentals, “you have to ask yourself what would it take for the FX market, which is clearly worried about what Brexit means, to really pull the pound significantly higher.”

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The pound rose 0.8 percent to $1.2577 by 3:32 p.m. in London, having earlier reached $1.2615, its highest since Feb. 2.

Bennett pointed out that despite Monday’s move, sterling has been in the $1.20-$1.28 range since October. “The risks, rightly or wrongly, are still perceived to be on the downside,” he said.

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