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The view of UBS analysts was that "a combination of fiscal tightening and loose monetary policy should prompt a period of prolonged sterling weakness", reports Reuters.
European stress test results and favourable gross domestic product data released on Friday combined to push the pound to its 12-week peak, with UK share prices also benefitting from the boost to speculator confidence.
Sterling was up 0.4 per cent at 08:36 BST to $1.5502, while the single European currency fell 0.3 per cent to 83.49p.
Last week it was revealed the economy grew during quarter two at its fastest rate for four years, putting the pound in line for its largest one-day rise against the euro for more than seven weeks.
CMC Markets analyst Michael Hewson commented: "Whichever way you look at it those GDP numbers were very good figures."
Posted by Clive Arneil
