GBP USD Continues to Soar; Can It Last?

GBP USD bulls continue to take advantage of the need for more risky assets despite no solid evidence the U.K. economy is actually improving.  Warnings by the Bank of England that a recovery will be slow and long are being ignored by speculators who are just reacting to the fresh money leaving the safety of the U.S.  One has to wonder how long this speculation will last before traders will demand to see real economic improvement.

British Pound investors continued to bet heavily on a quick recovery in the U.K. economy by sending the currency soaring to a multi-month high.

Strong rallies in global equity markets helped push this currency even higher as trader appetite for higher paying assets helped increase trader optimism that a global economic recovery will come sooner rather than later.

Fundamental factors such as a global stock market recovery and a more optimistic outlook for manufacturing are helping to support the market. Technically, the crossing of the 200-day moving average contributed to the surge by triggering stops.

This entire rally is based on speculation that the U.K. economy is on the path to recovery although recent economic reports and the Bank of England still indicate there is apparent weakness in key sectors. The BoE just last week warned that the recovery would be long and labored. This is raising the question as to whether this current rally is starting to get too far ahead of itself. 

There may be one more surge to the upside in the GBP USD but sellers are likely to resurface at 1.6085.