Is this the new consensus trade for investors?

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Sterling has boomed since mid-April and some analysts say the rally could run way beyond next month's national election, despite concerns that no party will be able to form a majority government.

The pound hit a fresh 7-week high against the dollar on Tuesday, shrugging off new data that showed U.K. growth slowed in the first quarter, missing market expectations. The currency has appreciated 4.5 percent since the middle of April, although it is still lower on the year against the resurgent greenback.

"I think we're at that point now, if the dollar's going to break down, then what is that candidate that's going to be that lead for the stronger currency? I think sterling has to be that lead, we've pushed through some big levels technically," David Sneddon, head of technical analysis at Credit Suisse, told CNBC on Monday.

With sterling trading around $1.5298, Sneddon forecast the currency would push back up to $1.5550 or $1.5570 in the short term, with a "broader move" taking it still higher in the medium term.

A financial trader monitors data on computer screens as a desktop television shows euro currency banknotes at the Frankfurt Stock Exchange in Frankfurt, Germany.
Martin Leissl | Bloomberg | Getty Images

As none of the major parties are forecast to win enough seats to form a government, several days, or even weeks, of political wrangling are expected after the election on May 7.

However, Peter Elston, chief investment officer of Seneca Investment Managers, argued that the outcome of the election would not have much bearing on sterling.

He told CNBC on Tuesday that investors would focus more on the U.K.'s hefty deficit in its current account - the measurement of the country's trade balance - then future policy differences.

The country's current account deficit widened to 6 percent of nominal GDP in the third quarter of last year, making it the joint largest deficit on record since 1955.

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Higher-yielding currency

On attraction of holding sterling is that it is currently higher yielding than some of its counterparts, according to Christopher Mahon, the director of asset allocation research at Barings. This means that investors holding the pound receive greater returns.

"Sterling is actually relatively higher yielding versus the dollar and versus the euro," he told CNBC Monday.

Mahon said this reflected that the main interest rate in the U.K. was currently stronger, at 0.5 percent, than rates in other major developed countries. For instance, the key refinancing rate is 0.05 percent in the euro zone and 0-0.25 percent in the U.S.

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Jane Foley, senior currency strategist at Rabobank, said this interest rate differential had supported sterling this year. However, she warned that weak inflation in the U.K. might mean the Bank of England hikes rates later than expected, which could cut into the rate differential.

"Cable (sterling/dollar) will carry on fluctuating," Foley told CNBC on Monday. She forecast that sterling would drop to $1.47 in the next couple of months if interest rate expectations were dialed back.