The Pound Sterling to Euro exchange rate has continued to rally today; the Euro is suffering as disinflationary pressures weigh in leading some to speculate the European Central Bank might continue to ease monetary policy. This puts the Pound on track for its biggest weekly gain since mid-February.
The Pound to Dollar exchange rate hasn’t managed to gain, the exchange rate seems to have been held in check by a bigger-than-expected UK current account deficit.
The Office for National Statistics said the UK current account deficit was being driven in part by a fall in income from investments earned abroad; the value of foreign investments has been lessened by the strengthening of Sterling that said, Britain's trade deficit is also a big factor.
The ONS have confirmed that Britain's economy grew 0.7 percent in the October-December period of last year; this was broadly expected and factored into the market.
The Pound is still receiving a boost from the British retail sales data released earlier this week.
This UK data beat expectations and bolstered the chance of monetary tightening next year.
Bank of England policymaker Martin Weale has been making some pertinent statements regarding the plotted course of UK interest rates, he said a more robust economic recovery would mean a gradual increase in interest rates next year.
He added that wage inflation was picking up and that this boded well and rates could not stay at record lows forever. All these comments were perceived as Sterling positive.
Most Forex traders are maintaining their recent policy and buying the Pound on dips, the expectation is that the economy will outperform other western nations during 2014.
Policymakers in Europe are still trying to keep the Euro weak; a weak Euro could help their economies more than any other economic factor.