The pound today hit a fresh high against the US dollar since crashing after the Brexit vote, with traders continuing to jump on the bandwagon at the start of the year.
Sterling rose by around 0.7 per cent to reach intraday highs of $1.3970 against the greenback, while hitting a five-week peak against the euro.
The pound's rally against the dollar over the last 12 months has come against a backdrop of a fairly resilient British economy, in spite of painful real wage falls, and an extended sell-off in the dollar.
Read more: Sterling rises above $1.38 for the first time since the Brexit vote
Yet the immediate trigger for today's gains were unclear. Viraj Patel, a forex strategist at ING, said he is "slightly surprised" by the speed at which the pound has risen towards $1.40, a level they predicted it would reach by the end of the first quarter.
"We do think there is more upside potential for the pound in 2018 – but for the next wave of appreciation to kick in, we'll require a positive pound-specific catalyst," he said.
Two such catalysts for further upward movement could be an improvement in UK economic data and an agreement over a Brexit transition deal, Patel added.
Peter Ashton, managing director at payments firm Eiger FX, said: "Momentum appears to be the prime factor behind sterling’s gains as there is little by the way of news to explain the rally."
Ken Odeluga, market analyst at spread-betting firm City Index, said the pound may have been given some extra impetus after breaking through a symbolic level hit in February 2016, the start of a rally before the EU referendum in June 2016.
Read more: Sterling hits its highest since the Brexit vote as FTSE 100 smashes records
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