Pound Sterling may see additional gains against the euro as the UK looks set to grow at a faster rate than eurozone rivals this year.

GBP/EUR is nearing its highest levels since April, at a time when a number of major eurozone countries and the United States reports a spike in Covid cases as the spread of the Delta variant rampages.

As such, according to investors, this may lead the Bank of England to hike interest rates before the European Central bank and Federal Reserve.

"Constructive news on the pandemic, if sustained, could allow the Bank of England, which meets next week, to drop pound-positive hawkish hints on the outlook for monetary policy," according to Joe Manimbo, Senior Market Analyst at Western Union.

As it stands, Sterling is this week’s best-performing major currency, with particular substantial gains against the commodity dollars, at the time of writing.

High vaccine numbers, declining coronavirus cases and the easing of restrictions means Britain’s economy looks set for robust growth for the remainder of the year, leading the International Monetary Fund to increase their economic forecasts in their latest quarterly report.

The IMF upwardly revised economic growth forecasts for the UK to 7.0%. As such, Britain will have the fastest growth in the G7 along with the United States.

Germany is predicted to grow at 3.6%, France at 5.8% and Italy at 4.9%, stated the IMF.

In addition, according to Credit Suisse, the market is now thinking more "coldly and deliberately about who the relative FX winners and losers are likely to be when it comes to the Delta variant".

"GBP has been one of our favourites given our view that it sold off too much early last week, and we now extend our target for our short EURGBP trade to 0.8450," stated Shahab Jalinoos, Global Head of FX Strategy at Credit Suisse.

EUR/GBP trading to 0.8450 gives GBP/EUR an upside target of 1.1834, reports Pound Sterling Live.