LONDON, Oct 30 - Sterling hit three-week peaks against the dollar on Tuesday as expectations of further gloomy U.S. data in coming days and sharp losses on Wall Street put the U.S. currency on the defensive.
With little major domestic economic news to drive the pound, it was seen drawing support from optimism the British economy is set to be the best performer among the world's richest nations this year.
Such expectations helped the pound hover within half a percent of the previous day's three-week highs against the euro.
"The dollar has weakened due to concerns about the U.S. economic outlook," said Tom Vosa, market economist at National Australia Bank in London. "Sterling undoubtedly got a lift from last week's (UK) GDP data and markets are focusing on the UK growth outlook, which is better than in the U.S. or euro zone."
News on Friday that the British economy grew a stronger than expected 0.6 percent in the third quarter helped sterling rebound from two-month lows set a few days earlier.
In contrast, the dollar has weakened across the board. The benchmark Dow Jones industrial average, closed almost three percent lower on Monday and dealers said worries Argentina might default on its $132 billion of debt was also undermining the greenback.
At 0837 GMT, sterling held near earlier three-week highs around $1.4565 , more than three cents above two-month lows set below $1.42 last week.
The pound was steady around 62.20 pence per euro , within a half a percent of Monday's three-week highs.
Markets were also braced for U.S. October consumer confidence data at 1400 GMT.
Chartists said there was potential for sterling to extend recent gains against the dollar. v "Sterling has rallied aggressively higher and is poised to reach its short term target of 1.4600/25," said Karen Jones, technical analyst at Commerzbank in London.
"This is the 61.8 percent retracement of the last leg down and we suspect will provoke some profit taking."