Sterling Reaches $1.40 As RLAM's Greetham Warns Of 'sudden Drop In The Pound'

The $1.40 level is significant as it has been the pound's floor against the dollar since the 1980s.

Sterling is one of the strongest performers so far this year, largely due to the weakness of the dollar, and the best-performing G10 currency in the past six months having risen 7.3 per cent against the dollar.

UK inflation 'peaks' as sterling hits post-Brexit high

However, Greetham head of multi asset at RLAM, dismissed sterling as being just one of many currencies gaining against the dollar, rather than gaining on its own merit, adding that sterling's weaker position against the euro supports this.

Sterling was relatively flat against the euro at €1.14 as of 3.30pm, while the pound's level against the dollar hovered around $1.40.

"If the recent strength in sterling was linked to progress on Brexit, you would envisage seeing UK interest rate expectations rising, relative to the US," Greetham said. "In fact, the reverse has happened. The dollar has weakened despite a marked increase in US interest rate expectations relative to the UK and other countries.

"This creates the risk of a snap back in the dollar and a sudden drop in the pound, regardless of the state of the negotiations in Brussels."