GBP/USD back above 1.4200, heads for highest close since Brexit referendum

• Pound lags but consolidates gains versus dollar. 
• GBP/USD capped by 1.4270. 

The GBP/USD rebounded near the 1.4200 area and rose back into positive territory, approaching daily highs. The move to the upside took place amid a decline of the US dollar across the board. Recently rose to 1.4267, slightly below the daily high at 1.4273 reached on European hours.

The greenback failed to benefit from the latest US economic numbers (PMI and ISM surpassed expectations). Regarding data, on Friday the official employment report will be released. 

Despite rising against the US dollar, the pound was lagging behind. EUR/GBP erased losses and is back in positive territory while GBP/CHF failed to hold to gains. UK data released earlier today came in below expectations: the Markit Manufacturing PMI dropped in January to 55.3 (vs 56.5). 

Between Brexit and monetary policy 

The “hawkish hold” from the Federal Reserve yesterday, on Yellen’s last meeting, failed to boost the greenback. The US Dollar Index (spot) was moving toward the multi-year lows it reached last week. 

The pound remained resilient despite Brexit concerns and the political dysfunction in the UK with PM May facing calls to resign. Rising expectation about a possible rate hike from the Bank of England in the coming quarters appears to be offering support.