GBP/USD rose 0.55% in early U.S. trade on Tuesday, helped by sterling's gains versus the euro and an unexpectedly weak U.S. ISM report, allowing cable to poke through its daily cloud top at 1.3514 and opening the way to challenge the Dec.
31 high by 1.3551.
Benefiting from expectations that the BoE will keep pace with Fed rates hikes in 2022 -- and the disappointing U.S. ISM featuring an unexpectedly large drop in the prices paid index -- cable could set its sights to November 2021 highs by 1.37 and the 200-day moving average by 1.3743 if it can achieve a close above 1.3551.
The pound's strength versus the euro highlights the growing FX focus on recovery, rates normalization and widening interest rate differentials RVSP between low-rate economies like Europe and Japan, on the one hand, and central bank tightening in the U.S., UK, Canada and potentially Australia.
This has allowed GBP, CAD and Aussie to benefit, while COVID-19 developments remain a wild card in case they threaten the global recovery.
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