Sterling edged higher in U.S. trade, reversing early European weakness that followed GDP data showing UK output slumped 9.9% in 2020 as markets took heart from year-end economic improvement, leaving cable with sights set on 1.40 nL8N2KI1UV.
The early-New York gains took sterling back above 1.38 to post-GDP high at 1.3849 nL1N2KI0YA, below its recent trend high at 1.3865.
Sterling remains relatively well bid as traders expect the UK's rapid vaccine rollout, and much-reduced Brexit overhang, to positively affect near-term UK growth and inflation.
GBP bulls are also receiving a tailwind from recent EUR long unwinds, which has sent EUR/GBP down 2.67% over the past 3-months as EUR longs are swapped into underweight GBP positions.
For now, GBP/USD seems destined to test 1.40 nL1N2KF0ID.
The pound's initial climb from 1.30 to 1.35 came on USD weakness and this recent leg higher on EUR weakness.
GBP net longs at 9,616 contracts, and the larger 53,658 contract gross long, may begin unwinding to take profits as GBP/USD moves closer toward significant resistance and option interest by 1.40 nL1N2KF186.
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