The pound touched its highest levels against the U.S. dollar since the country voted to leave the European Union in June of 2016, extending gains versus the beaten-down greenback even as some investors continue to question the strength of the domestic economy and the nature of its post-Brexit relationship with Brussels.
The pound was marked at 1.4027 in late Tuesday trading in London, the highest since June 24, 2016, extending a five-month rally that has lifted the currency more than 9.8% against the greenback. The dollar index, meanwhile, which measures its value against a basket of six global currencies including the pound, dipped to closer to a fresh three-year low of 90.11.
"While the lion's share of Sterling's gains this year can be attributed to ongoing Dollar weakness, the gains could partially be due to the renewed hopes of a "soft Brexit", said FXTM research analyst Lukman Otunuga.
A spokesman for Prime Minster Theresa May's office said Tuesday that Britain was still working on an agreement with officials in Brussels to iron out details of a transitional agreement between the two economies when the U.K. formally leaves the European Union in March of 2019, refuting an earlier report from the London Independent newspaper that suggested a "Noway-like" option had been agreed.
The report came amid speculation that the British government had been delaying a long-awaited report on the impact of Brexit within its key financial services industry, which accounts for nearly 15% of the country's annual economic output.
"We always let you know in the normal way if there is to be one," May's spokesperson told reporters when pressed on the issue, raising the ire of Nicky Morgan, a Conservative Party lawmaker who chairs the influential Treasury Committee.
"Financial services will be one of the most challenging elements of the Brexit negotiations,", she said in a statement. "A paper articulating a clear sense of direction, and a desired end-state, could have boosted confidence that the government is up to the task."
Britain's broader economy, meanwhile, is showing both incredible signs of resilience and worry suggestions of decline in equal measure. Earlier Tuesday, the Confederation of British Industry's closely-watched barometer of manufacturing orders slowed from a 30-year high last month, but still topped economists' forecasts.
Last week, however, retail sales over the month of December plunged 1.5% from the same period in 2016 as shoppers declined to extend their holiday spending amid the fastest pace of consumer inflation in five years and flat-lining wage growth.
The International Monetary Fund, which lifted its forecasts for global economic growth to 3.9% for this year and next, said Britain will likely expand at less than half that pace -- 1.5% -- over the next two years.