Sterling staged modest gains against a basket of currencies in yesterday’s London trading session but only managed to trade within narrow ranges due to a lack of economic data.

In the absence of fresh figures for traders to scrutinise, Sterling was able to hold onto Tuesday’s bullish gains, which came as a result of the preliminary 3rd quarter GDP figures.

Sterling did however enjoy hefty gains versus the Australian Dollar after Australian CPI figures came in below forecasts. Many in the market felt the AUD has been overbought in recent days leading to a near term price correction. Sterling managed to gain over 1 percent on the day versus the high yielder and is currently trading at a healthier 1.6155.

The Pound slipped against the US Dollar, which managed to claw back some of the previous session’s losses. The US Dollar showed broad strength after a report published in the Wall Street Journal suggested that the Fed may well enter a second stage of quantitative easing through a bond purchase programme but suggested the programme would amount to a just a few hundred billion dollars. The news was met with renewed optimism for the Greenback as market participants had been expecting a QE programme to be as large as $1 trillion.

The Dollar received a further boost late on in the afternoon when the new Homes Sales data for September came in far well above expectations. Sterling lost over half a percent versus the Dollar in the London markets.

Overall it’s been a fairly positive week for Sterling. Standard and Poor’s revised credit rating and growth figures which doubled many analysts forecasts has provided much needed support for the ailing British Pound.

Sterling could find near term support from the impressive growth figures, which should lessen the likelihood of BoE policy makers opting for further stimulus measures at next weeks Policy meeting.

Longer term though, Sterling remains vulnerable. Several leading economists have expressed concerns over the fiscal tightening measures laid out in George Osborne’s Spending Review, fearing the actions taken could stunt economic growth.

In other news, the central banks of Norway, New Zealand and Poland all staged monetary policy meetings yesterday, with the result for all three being leaving interest rates unchanged.

Daily Market Insight courtesy of Alex Middleton from UK Currency Broker TorFX