Sterling’s gains continued yesterday as we saw it rise to a 5 month high against a broadly weaker euro.

Data released in Germany saw a bigger then expected decline in German investor sentiment which along with flagging market confidence in Greece’s public finances meant the euro was a its lowest since August last year.

The recent positive run of data releases in the UK led many analysts to believe the central bank’s quantitative easing programme would be on hold next month once the current target has been met within the next few weeks but remain split over when the policy will again be tightened.

Minutes from the last BoE meeting shed little light on any policy outlook and policymakers said February’s inflation forecasts will give a better idea of the state of the UK economy. A unanimous 9-0 vote was cast to hold interest rates at the current record low and to maintain its £200bn asset buying programme.

UK employment data was released which showed a showed a surprise improvement in the labour markets. The number of Britons claiming unemployment in December fell by 15,200 the biggest fall since April 2007 and way above forecasts. The Office for National Statistics said the rate of unemployment now stands at 7.8% in the UK, down from the 7.9% reported last month, causing sterling to retrace some of its recent losses against a stronger dollar.

At 3.30pm the pound was down 0.6% on the day at $1.6275, dropping below the six week high set on Tuesday. Against the euro it was up 0.7% on the day at €1.1538, however it had been as high as €1.1550 earlier in the session.

In the US, PPI Producer Price Index which measures the average changes in prices in markets within the US by producers of commodities in all states of processing came in higher then predicted and with data showing more building permits for new homes have been released all faired well for the dollar.

This morning

Early this morning the pound began to fall back slightly from yesterday’s rates as investors became weary of the release of the UK public sector borrowing figures.  At 9.30 the figures were published and cast no real surprises, sterling made no further losses and sat at $1.6159, €1.1497, 12.21 ZAR, 148.067 JPY, 1.6960 CAD, 1.6924 CHF, 11.67 SEK and AU$1.7778. The euro continued its decline against a strong US dollar at $1.4055

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