Sterling review

The pound spent much of August quietly rallying against the dollar, “rising for two straight weeks amid a raft of positive UK data”, reported The Daily Telegraph. Sterling briefly touched a high of $1.38 against the dollar last week, “rounding off its best performance against the greenback since the Brexit vote”, when it plunged 10% to its lowest level since 1985. Robust retail sales and unemployment data, combined with “upbeat” consumer and business surveys, have lifted hopes of economic growth – and the pound has been a clear beneficiary.

Yet sterling still looks “fragile”, said Tommy Stubbington in The Sunday Times – not least because speculators are threatening its “nascent recovery” by “betting that the rally will prove short-lived”. Hedge funds have “cranked up bets against the pound to their highest ever level”, according to US data, racking up short positions worth $7.8bn last week. The currency’s mixed fortunes reflect the struggle to assess “the severity of the postreferendum shock” amid a welter of contradictory evidence. Confidence is holding up, but there’s an ominous feeling of a lull before the storm. “There are more shocks to come – Article 50 is yet to be triggered,” noted Brian Hilliard of Société Générale. City analysts agree. They expect sterling to finish the year at a new 31-year low of $1.27, “bringing a potential payday for the funds betting big on a further decline”.