Sterling Surges to Five-Month High on US Treasury Buyback Operations

The British Pound Sterling has been on a remarkable run, climbing to a five-month high of almost 1.3700 last week before pulling back slightly to around 1.3600. The rally is largely attributed to the US Treasury's announcement that it would double its long-dated buyback operations from September 9, which pushed down the US Dollar by roughly 2.5% over the past month on a trade-weighted basis.

The absence of any significant economic data or interest rate decisions in Britain has meant that every pip of this move was priced elsewhere, with the Bank of England's next decision scheduled for September 17.

However, concerns are rising about the correlation between yields and the Dollar's performance. Reserve currencies are not supposed to behave like this, and it remains to be seen how long this trend will continue.