The pound rose to its highest level in more than two months against the dollar on Monday.
 
Yesterday morning, the sterling rallied to a level of $1.9730, despite the announcement that March saw growth in the UK's manufacturing sector slow down.

Analysts expect the Bank of England's rate-setting monetary policy committee (MPC) to hike the base rate on Thursday, impacting on the exchange rate.

According to currency strategist Ian Stannard, speaking to Reuters, the pound will be "quite well supported" in the run-up to the MPC's decision.

The Institute of Economic Affairs' shadow MPC, a group of independent economists meeting monthly to discuss what they would do with the UK's interest rate, said the base rate should be hiked on Thursday.

They voted 8-1 in favour of a rise this week, echoing the beliefs of various analysts saying continued growth in the housing market as well as high retail sales levels earlier this year call for an interest rate above the current 5.25 per cent, Reuters reported.

Speaking to the news agency, RBS Financial Markets currency strategist Adrian Schmidt said:
"The market is now priced for about 50-50 chance of a move on Thursday from about 20 per cent chance last week and that seems to be behind sterling's strength recently."