- USD on sale again

- GBP/USD up to 33-highs

- Yuan demand helps drive USD downside

- Technical breaks could open up further GBP/USD upside

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GBP/USD spot at publication: 1.3848Bank transfer rates (indicative guide): 1.3463-1.3560FX transfer specialist rates (indicative): 1.3699-1.3750More information on securing specialist USD rates, hereThe Pound-to-Dollar exchange rate (GBP/USD) has hit a new multi-week high in mid-week trade having reached 1.3856, and the gains can continue short-term say analysts.

"The dollar remains under the cosh, lifting sterling to its fresh 33-month highs," says Neil Wilson, Chief Market Analyst for Markets.com. "GBPUSD breached the key 1.3450/60 area, the last line of resistance before the round number target for bulls at 1.40."

Above: GBP/USD is trending higher again.

"The broader USD continues to trade with a much softer tone, drivers seem to be the relentless CNH bid into Chinese New Year and the fact that US yields backed aggressively off key levels and have now calmed down," says a briefing note from the JP Morgan corporate spot trading desk in London.

The JP Morgan note hints at the importance of the Chinese Yuan in broader market movements, suggesting that strong selling of the Dollar by Chinese investors could be prompting a broader Dollar decline.

The decline in value of China's currency over recent hours follows the release of Chinese inflation data that showed prices actually fell back by 0.3% year-on-year in January, where markets were looking for a less severe -0.1% reading.

Above: Dollar decline against the Yuan is a key driver of broader USD weakness.

"The negative inflation print for China in January for a second time in three months was the highlight of a generally calm trading session in Asia. The immediate takeaway is positive for the CNY via higher real rates (10y 3.27%) and positive spread vs USTs," says Kenneth Broux, an analyst at Société Générale.

"For the dollar, a 1.2% decline for the DXY since Friday may not seem overwhelming but the short-term charts are flagging danger signals," says Broux of the Dollar index - which is a broader measure of the Dollar's performance based on key Dollar-based exchange rates.

"The break below the technical level of 90.406 brings 90.00 in play and a close below could hasten a return towards the lows of early January. EUR/USD is back to flat MTD. But with the ECB on top of the euro - Lagarde speaks today - dollar bears are placing their chips on GBP and JPY," adds Broux.

The Dollar entered the current week on the front foot, having advanced against all its major peers over the course of the previous week. The rally had lead some in the market to question whether the Greenback would in fact be a laggard in 2021 as was a consensus expectation at the start of the year.

There were observations that the U.S. economy would likely outperform the rest of the world again in 2021, leading to the potential for higher U.S. interest rates which would in turn aid the Dollar higher.

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"We added to our modest sterling longs yesterday via GBP/USD and look for this move to keep going at least until the end of the week (Chinese New Year on Friday)," says JP Morgan.

JP Morgan's dealers say conviction remains pretty moderate at present but it would increase should they start to see evidence of Real Money clients coming back to buy the Pound.

Upgraded forecasts for the Pound from ING suggest substantial further upside against the Dollar could transpire in 2021 as its post-referendum undervaluation fades, they see GBP/USD lifting back above 1.50 before year-end.

"The prospects for sterling have improved dramatically and the undervalued currency should benefit from the mix of faster vaccination, stronger rebound in 2Q and a less dovish BoE (vs the ECB)," says Petr Krpata, chief EMEA strategist for currencies and interest rates at ING.

Above: The UK's vaccination programme is seen as being supportive of Sterling in the near-term.

"With downside risks for Sterling more fully priced, we see scope for further Sterling strength in the near term amid quicker vaccine roll-out," says Paul Robson, Head of G10 FX Strategy at NatWest Markets.

Commerzbank's lead technical analyst Karen Jones says GBP/USD has eroded Januarys high at 1.3760 and pressure currently remains on the topside as a result.

"Above here lies the 1.3836 February 2016 low. Longer term the 2018 peak at 1.4377 is being targeted," says Jones.

Near-term dips should now see 1.3750 act as initial support, she adds.

"The market will remain bid above 1.3520/67 and only below 1.3520 would alleviate immediate upside pressure for losses to the 1.3350 late December low, and the 1.3331 7 month uptrend," says Jones.