Sterling soared past the metaphorical $1.31-barrier yesterday after a report suggested the DUP is poised to lend its support to Mrs May if her Brexit deal includes a clear time limit to the Irish backstop, according to The Sun. The pound reached as high as $1.3114 yesterday, its best level since November 8, 2018, after enjoying gains of 1.8 percent this week. But Michael McCarthy, chief markets strategist at CMC Markets in Melbourne, is predicting the pound could advance again should the DUP report prove true. The currency expert said a Sterling breakout could see the UK currency push as high as $1.38.
He said: “If this report is true, I expect sterling to rally to $1.32 versus the dollar.
“A technical breakout to $1.38 is also a possibility.”
The House of Commons will vote next Tuesday on alternative Brexit plans after it rejected the deal Mrs May negotiated with the European Union.
Growing investor interpretations that a no-deal Brexit is look less likely has fuelled a 2.3 percent rally in the pound this month, with much of the gains coming in the last few days.
But with no signs of how Mrs May will break a parliamentary deadlock over Brexit, some market watchers are advising caution.
Ricardo Evangelista, a senior analyst at ActivTrades based in London, said: “There is still a lot of uncertainty and at current levels, the pound is reflecting the midway of two extreme scenarios, i.e. a no-deal Brexit and no Brexit.”
Meanwhile, the US dollar is facing a tough year ahead as growth at home and globally comes under pressure for the ongoing trade war with China and the Federal Reserve inching closer to pressing the pause button on its steady rate-hike cycle.
A partial shutdown of the US government is also putting pressure on the dollar, weakening investor sentiment as the standoff reaches its 35th day.
Against the US dollar on Friday, both the Australian and New Zealand dollar reversed early losses and gained 0.1 percent, to $0.7103 and $0.6768 respectively.
The euro gained 0.1 percent to $1.1321, although longer term prospects look bleak for the single currency.
The European Central Bank provided the latest warning about Europe’s dimming outlook on Thursday, forecasting weaker-than-expected growth in the near term.
Analysts expect the euro to underperform peers in the near term as monetary policy is expected to remain accommodative in the euro area this year.