STERLING climbed to within a hair's breadth of the psychologically key dollars-1.90 level yesterday - going to dollars-1.8999 - as it attempted to add to last week's near-three cent gain.
Neil Parker, UK market economist and currency expert at Royal Bank of Scotland, attributed the pound's recent run to recent stronger economic figures which had rekindled talk of the possibility of a further rise in interest rates this cycle.
Property website Rightmove said yesterday that UK house prices had risen by 2.3-per cent between January 8 and February 12, and its annual rate of inflation for the residential property market edged up from 10.9-per cent to 11.1-per cent. Halifax, the UK's biggest mortgage lender, said earlier this month that UK house prices had risen by a seasonally-adjusted 0.8-per cent in January.
This week could be a big one for the pound, with economists expecting an upward revision of fourth-quarter UK growth from 0.5-per cent to 0.8-per cent when National Statistics publishes its second take on the numbers on Friday. Minutes of the Bank of England's monetary policy committee meeting on February 9 and 10 will be published tomorrow and the City will be watching for the tone of the discussions that preceded the decision to hold base rates at 4.75-per cent.
Referring to sterling's recent rise, Parker said: "I think it has been a fairly set trend now with regard to the rise that we have seen in specific economic indicators.
"We have seen an improvement in the manufacturing numbers, we saw a fall in the trade deficit, we saw better retail numbers (for January).
We are expecting an upward revision to GDP (gross domestic product) growth in the fourth quarter.
"Then you have the housing market as well - you have had housing market (figures) over the last week or so that have pointed to a reinvigoration."
He added: "It has reignited the whole debate on UK rates, and are they going to go up again."
Although nearly half of economists are predicting UK base rates have peaked already at 4.75-per cent, Royal Bank of Scotland is forecasting one more quarter-point rise this cycle in August.
Parker, however, was sceptical about whether the pound would rise through dollars-1.90 again.
Asked about this possibility, Parker replied: "I am suspicious. dollars-1.90 - it is a big psychological level. Given the plethora of strong data, why hasn't it gone (through) already?
"There is probably speculative positions around dollars-1.90 by central banks looking to pick up a few cheap dollars."
Parker also emphasised that "it is not all one way" on economic data, and some figures were still poor.
Referring to the currency market, he said: "We might have got a little bit ambitious with ourselves on the back of these numbers."
He was also sceptical about some of the recent house price surveys.
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