The sterling climbed to a fresh two-year high against the US dollar after positive comments about Britain’s economic recovery from Bank of England Governor Mark Carney were followed by data showing UK house prices jumped to a 14-year high in November.

However, Carney also said that currency is now a headwind, an assessment that the BoE may have to expand on over the coming months.

The US dollar fell to new six-week lows against the euro despite weak eurozone data. European Central Bank president Mario Draghi will be speaking and could comment on the euro’s export-crimping strength. Stronger-than-expected UK housing data is lifting the sterling while numbers from China are supporting risk taking and damping demand for the safe haven yen.

Markets should focus on UK industrial and manufacturing data which, if positive, could push the sterling to new highs against the yen and US dollar.

Sterling

The pound is moving higher against the euro after RICS housing survey showed UK house prices rising in November at their fastest pace in 14 years. Bank of England Governor Mark Carney was speaking and also gave another positive assessment on Britain’s economic outlook which was positive for the sterling.

However, Carney also warned that currency is also now a headwind for the economy, an assessment that the Bank of England may expand on over the coming months.

US Dollar

The US currency fell to a new two-year low against the sterling and fresh six-week troughs versus the euro. No economic data on US economic calendar could leave the US dollar open to further selling pressure, even more so after Chinese data suggested the world’s second strongest economy was is in a comfortable position which is another factor supporting risk appetite.

Euro

The euro climbed to a fresh six-week high against the US dollar after markets continued to take on risk despite much weaker-than-expected German industrial data. Industrial output in Europe’s main economy contracted by 1.2 per cent in October versus forecasts of a 0.8 per cent expansion. Output sank by 0.7 per cent in September.

Eurozone Sentix index for December, a measure of investor confidence, also fell. Still, markets ignored fundamentals and instead focused on the prospects of Federal Reserve stimulus which looks likely to continue into 2014, which is weighing on the US dollar and supporting carry trade activity.

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