Sterling surged to a 7-and-a-half-year high against a basket of trade-weighted currencies on Friday, after the head of the Bank of England (BoE) hinted at an earlier-than-expected interest rate rise. But analysts aren't convinced that the pound's strength will last.
BoE Governor Mark Carney said late Thursday that there would be a "sharper" focus on the process of raising interest rates around "the turn of this year". The comments sent the pound higher, and on Friday it was trading around $1.5618. Against the BoE's trade-weighted index, it hit 94.5 – its highest level since March 2008, according to Reuters data.
An interest rate rise usually strengthens a country's currency, but analysts said that this might not be the case when it comes to sterling against the dollar.
"We think that the U.S. Federal Reserve will raise rates at a faster pace than the BoE over the coming years and that reflects different outlooks for the economies, with the U.S. recovery more advanced than the U.K.'s," Samuel Tombs, senior U.K. economist at Capital Economics, told CNBC by phone.