Sterling trends north, but there are factors that could change the outlook.
The pound's rebound began on December 21 and has barely looked back; USD/GBP climbed 3.27%, while USD fell only 0.93% at the January 11 close.
Bank of England interest rate expectations have been the significant positive factor.
US10YT=RR yields climbed 37bp from December 21 to January 11 and GB10YT=RR moved up 45bp.
BOEWATCH shows a 25pt hike to 0.5% priced at 77.18% for the next meeting on February 3.
Federal Reserve Chairman Powell is ready to begin tightening, but remains cautious nL1N2TR1FJ
The technical outlook is positive but there are clouds on the horizon.
Political uncertainty in the UK, as PM Johnson moves from one controversy to the next nL8N2TR1GInL8N2TR2I6, and COVID-19 casesspreading rapidly nL9N2Q5019, may hit the pound.
Talks on the Northern Ireland protocol resume this week.
Hopes that the UK may change its position after Liz Truss replaced David Frost to lead the UK negotiations faded when she insisted the UK is still ready to trigger Article 16 nL1N2TP057.
Talks have dragged on for months with little progress, but Northern Ireland elections on May 5 may be the catalyst for either a breakthrough or a breakdown.
Failure would leave trade tariffs on the table, which would be a major negative for sterling, as the EU remains its largest trading partner.
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