"Sterling has extended its gains this morning, and looks set to hold above the key €1.20 level," notes Richard Driver, analyst at Caxton Fx.

The euro faltered yesterday as it was reported that employment declined 0.2 per cent in the final quarter 2011, with employment in Greece representing an 8.5 per cent decline.


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"Despite this, European stocks have gained for a fourth straight day on the back of US growth. This should provide some short-term respite for the single currency, so this pair should remain fairly range-bound today, with downside risks limited," notes Driver.

Sterling is looking fairly resilient against the US dollar this morning, and we may see it gain a little more ground on profit-taking following the dollar’s recent gains.

The dollar initially gained ground against sterling yesterday morning following news that the ratings agency Fitch had put the UK credit rating on negative watch.

Sterling began recovering ground later in the session, as improving risk appetite on the back of positive economic data from the States undermined the US dollar’s safe haven appeal.

With no economic releases due from the UK today investors will look to CPI inflation figures and industrial production data from the US this afternoon.