Sterling posted gains against the dollar on Friday and is continuing to make ground this morning

The pound was a cent up against the dollar on Friday as market participants took profits on the greenback's modest bounce earlier in the week.

• The greenback extended losses after data showed that the US trade deficit widened more than forecast, to $36.5 billion in September, and that import prices rose 0.7% last month.
  
• Strategists noted that while trade is not usually a prime driver of currencies, the combination of rising imbalances and extremely low rates is typically a US dollar negative.
  
• The pound rose as a planned merger of British Airways Plc and Iberia Airlines sent the UK's stock market slightly higher and spurred speculation the economy is improving, boosting demand for the currency.
  
• However, sterling buying is commonly seen as market strategy when the price drops to $1.65 rather than speculative buying, as investors are keen to pick up sterling as it falls to cheaper levels.
  
• In trading this morning, the pound has pushed through resistance at $1.67, currently up over half a cent as rhetoric over China's yuan currency policy increased.
  
• Investors will be watching US retail sales data for October released at 13:30, which, if it follows forecasts, could boost risk appetite.