There are a few dynamics happening here; firstly we are seeing a lot of GBP shorts covering their positions as the prospect of indefinitely low interest rates recedes. Secondly we are seeing some significant buying of sterling by real money funds and also as a result of M&A activity. Once the EUR/USD stops falling, we may be in for a sharp, vertical rally in the cable.
On a more negative note for cable, there are a lot of stops now building below 1.6250 which may come in for some attention as the day unfolds.
