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This morning saw the GBP/USD cross rise to a fresh two month high, with the currency pair hitting $1.2771, a level we have not seen since the beginning of October.
GBP/USD graph.
Why is the pound rising against the dollar?
With little data coming out to support either currency, the reason behind the move can only be put down to investor confidence.
Over the past few months the dollar has gained massively because of its status as a safe-haven currency, and on expectations the Federal Reserve will raise interest rates before the end of the year.
The UK's exit from the European Union and the Eurozone's long term economic future have all played a major part in the dollar's rise. However, with the UK economy still exceeding expectations, and the chances of a hard Brexit beginning to fade, traders and investors are beginning to move back towards riskier assets such as the pound and euro.
There was evidence of this yesterday following the result of the Italian constitutional referendum, which was held on Sunday. Despite Prime Minister Matteo Renzi losing the vote and the prospect of an early election in 2017, many analysts and investors are taking the view a temporary government will be put in place until the official election in 2018.
Since the Italian referendum result the dollar has lost over one per against the pound and over two per cent against the euro. With rumours a rate hike from the Federal Reserve is already priced into the market, there could be further scope for the GBP/USD cross to rise even higher over the next couple of weeks.
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