The British pound continued to dominate its main trading partners, flattening tough technical resistance against the US dollar to register fresh 10-month highs. The pound is up sharply against the euro and hit September 2012 peaks against a currency basket after a second estimate on UK third quarter GDP growth bolstered optimism about the UK recovery. The pound’s rapid appreciation, up by over three per cent against the US dollar in just over two weeks, will keep traders and corporates guessing about whether the UK currency has come too far too soon and is set for a correction lower.

The euro found buyers after positive political developments in Germany and Italy met with much stronger consumer confidence data, also from Germany. The euro could see some movement following German inflation data which lands before inflation figures for the wider euro zone.

Sterling

The British pound soared to its highest since January 4th against the US dollar and Cable has now risen by over three per cent in just over two weeks after revised UK GDP data underlined Britain’s stronger-than-expected economic recovery. A second estimate on UK third quarter GDP showed no changes to the initial figure of 0.8 per cent; the fastest expansion in three years. Sterling is also up by around one per cent against the euro.

US dollar

The US dollar’s move to fresh six-month highs against the yen offered the US currency little support against the British pound, with the greenback tumbling through key psychological price support to end the day at new 10-month lows. The case for a December stimulus taper from the Federal Reserve gained traction after US economic reports showed fewer jobless claims and brighter consumer sentiment. The better data helped the US dollar to new two and four-month highs against the Australian and Canadian dollars respectively.

Euro

The euro found another positive in Germany’s strongest reading on consumer confidence in six years in December while Italy’s Silvio Berlusconi was finally pushed out of government. However, the euro is still under pressure from a rising British pound and could end the week at new lows against sterling if eurozone data on unemployment and inflation inflate fears of additional ECB action.

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