Analysts predict that the pound may continue to strengthen. Where is the target?

foreign exchange documentary platformSterling was one of the best performers among the world's major currencies in May as investors gave up hope of a summer interest rate cut in Britain and welcomed the prospect of an upcoming general election, leading analysts to expect further strength.

Sterling rose 1.7 per cent against the dollar in May to a high of 1.2701, buoyed by the unexpected resilience of the UK economy. However, lingering inflation fears have increased the likelihood that interest rates will remain higher for longer.

Sterling also hit a 21-month high against the euro last week, and analysts said the new British government could improve political stability and improve relations with the European Union, further boosting the pound.

Barclaysforeign exchange"Part of the reason for the pound's rally is that the market is looking forward to the election," said Themos Fiotakis, head of research. He added that he had expected the pound to rise to 1.22 against the euro by the end of the year (the euro fell to 0.82 against the pound), but in light of the early election, he raised his target price.

Currency analysts surveyed expect the pound to hit 1.30 against the dollar by early next year, while the pound remains stable against the euro.

But some analysts have warned that the new British government will have very little room for fiscal easing, and while the rate cut has been delayed, it has not been taken off the agenda.

Kit Juckes, FX strategist at Socie ́ te ́ Ge ́ ne ́ rale, said: "Sterling can rise a little and sustain it for months, not weeks, but a big rise would require a clear improvement in the outlook for economic growth and expectations that interest rates will remain high for quite some time."

GBP/USD daily chart

At 9:15 on June 3, Beijing time, the pound was trading at 2752/53