The pound has hit its highest level against the dollar for almost three years as global markets were buoyed up by hopes for a faster economic recovery from the coronavirus pandemic.
Sterling rose by 0.5% to hit a 33-month high against the dollar on Monday, trading above $1.39 on the global currency markets for the first time since 2018, while also rising to a nine-month high against the euro of almost €1.15.
Against a backdrop of growing optimism amongst global investors over the economic rebound from the crisis and rising commodity prices, the FTSE 100 closed up 2.5% at 6,756, marking the biggest daily gain for more than month. The biggest risers included 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 had been offered their first coronavirus vaccine, and as Boris Johnson prepared to outline a roadmap next week for easing lockdown restrictions this spring. The UK’s Brexit deal, despite evidence of problems with cross-border trade a month on from leaving, has also relieved pressure on the currency.
Hopes for a swift global rebound were underscored by Japan’s leading stock market index hitting the highest level for more than 30 years, after closing above 30,000 on Monday. The Nikkei 225 index, which tracks the value of Japan’s biggest companies, rose 1.9% to finish the day up at 30,084.15. Wall Street was closed for Presidents’ Day.
The Nikkei breached the 30,000 mark after official figures showed Japan’s economy growing by 3% in the final months of 2020, a stronger showing than expected. Japanese gross domestic product (GDP) for the year as a whole shrank by 4.8%, the worst performance since 2009, when the financial crisis rattled the global economy.
It comes after the UK recorded a 9.9% fall in GDP last year, the worst performance among the G7 group of wealthy nations.
Analysts said global markets had started the week on a high as investors remained confident that disruption from continued lockdowns at the start of 2021 would soon give way to an economic boom as restrictions are relaxed. Brent crude hit a 13-month high on Monday, reaching more than $63 per barrel, with tin hitting a seven-year high and copper an eight-year peak.
However, concerns still remain over the threat from new coronavirus strains and the damage to businesses after a year of Covid disruption.
Russ Mould, investment director at the stockbroker AJ Bell, said: “The boost to sentiment is a global story reflected in Japan’s Nikkei-225 hitting a 30-year high and with Asian stocks in general posting big gains. The long-awaited US stimulus is a big contributor, along with vaccines, to the positive mood.”