The pound has hit its highest level since April last year as the Bank of England looks poised to raise interest rates higher than the US Federal Reserve and further past the European Central Bank.
Sterling has gained more than 2pc since Monday, the biggest weekly increase since early December, and is the best performing currency among major economies this year.
It comes as the Federal Reserve paused its series of interest rate rises for the first time in 15 months on Wednesday at a range of 5pc to 5.25pc.
The ECB raised its rates to 3.5pc - the highest level since 2001 - on Thursday and President Christine Lagarde said a rise in July was also “very likely”.
However, she gave no guidance beyond that, which has helped increase confidence that the pound will become stronger as the Bank of England battles inflation. It is expected to raise rates to 5.75pc by the end of the year.
Friday afternoon the pound was given a further boost as European Central Bank Governing Council member Francois Villeroy de Galhau urged against drawing premature conclusions on where borrowing costs may eventually peak.
He said: “Nobody should rush to a premature conclusion about our calendar nor about our terminal rate. The latest market volatility on this terminal rate seems somewhat excessive.”
The pound rose as much as 0.5pc today to well over $1.28 and gained as much as 0.3pc against the euro, which is trading around 85p.
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