Monday saw the pound reach its highest levels for more than three weeks against the U.S dollar as Federal Reserve chief Ben Bernake expressed a note of caution on the U.S economy.
The pound rose by 1 ½ points against the dollar to $1.5952, moving past the high of $1.5924 we saw last week.
"This is more of a dollar move than a sterling move. It feels like the market was slightly overdone in being long of dollars and it's time to unwind some of that," said Geoffrey Yu, currency strategist at UBS.
Some analysts believe that the gains made over last weeks highs could test the $1.60 mark, especially if Mr Bernanke’s speeches this week confirm the views he expressed early on Monday.
If you are looking to buy dollars over the coming months it is worth considering a forward contract that will allow you to fix your rate of exchange for up to two years in advance.
The view for the medium term is that sterling’s direction will be determined by the Bank of England and their asset purchasing scheme.
Over the last few weeks we have seen the pound drop a number of times against the dollar on the back weak data coming out of the UK
If the bank choose to extend their asset purchasing scheme we could see the gains made over the last couple of months slip away, it was only in January that we saw the GBP/USD cross back in the $1.52 region.
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