Pound stalls after hitting $2

The British pound has traded actively in recent months as it poked above major psychological and chart resistance at the $2.0000 barrier for the first time since 1992. Yes, it now takes two U.S. dollars to buy one British pound. Mid-April action saw bullish sterling traders propel the currency to a peak at $2.0133 (Figure 1). However, the trade above the $2.0000 level was short-lived and analysts note that historically sterling has had a difficult time sustaining gains above that ceiling.

Overall, however, a variety of bullish factors have been underpinning the positive sentiment surrounding the pound, and for now those friendly factors remain intact. Abovetrend gross domestic product (GDP) readings have been a major factor supporting the currency. Also, high interest rates and expectations for an additional rate hike later this summer keep the currency as a top candidate on the carry trade list. Despite these factors, though, few currency watchers foresee a significant continuation of the recent rally.