Falling global equities enabled the pound to post gains against the euro

The pound continued to advance against a broadly weaker single currency yesterday, hitting a six-week high of 1.1167 as investors trimmed their euro holdings.

• Preliminary CPI data from Germany revealed that consumer prices remained flat on the year in October. Monthly data showed that the index did rise by 0.1% in October from September, though this rise failed to garner support for the euro.
  
• The markets also saw a slight withdrawal of risk activity yesterday as weak housing data in the US renewed concern over the health of the global recovery.
  
• The data dragged European equities down to three-week lows, which appeared to impact more severely on the single-currency, enabling the pound to gain.
  
• This morning, the pound is consolidating its position above 1.1100, with analysts reiterating that sterling is likely to remain in a holding pattern until next week’s BoE asset purchase decision.
  
• Investors are cautious amid uncertainty over whether the Central Bank will extend their quantitative easing programme, and so sterling movements may continue to be dictated by risk appetite in over the coming days.