Sterling has jumped after opinion polls suggested the UK would avoid a hung parliament after next week’s election.
The pound reached a seven month high against the dollar and its highest level against the euro since May 2017.
The move came after polls suggested a 10-point lead for the Conservative party and a parliamentary majority.
However, analysts cautioned against relying too much on one poll and said the pound gained momentum after it went past the $1.30 mark.
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The pound has risen sharply since October, gaining 6% in two months, after the EU granted Britain an extension to its departure from the bloc.
This week sterling climbed further as investors saw the prospect of a hung parliament receding.
Jeremy Stretch at CIBC World Markets said move was caused by traders consolidating all the recent polls and deciding that a Conservative majority was the most likely outcome.
The markets see that as ending the stalemate over Brexit.
However, Michael Brown, senior analyst at Caxton, said: “As we saw in 2017, polls can sharply narrow as we approach polling day.
“If a repeat situation pans out, seeing Labour gain ground and hung parliament territory approach, sterling will likely face stiff headwinds.”
The pound gained as much as 0.83% on Wednesday to touch $1.31 while against the euro, the pound hit a high of €1.183, up 0.84%.
Jane Foley from Rabobank said the pound’s rise was mainly due to “technical reasons” after it went over the “psychological” $1.30 level.
The initial referendum result in 2016 sent the pound sharply lower against other currencies. Since then its value has tended to rise when a Brexit deal, particularly one maintaining closer ties with the EU, was in prospect.
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