Sterling has surged to a month high against both the euro and dollar following suggestions from Bank of England Governor, Mervyn King that the bank will not increase its QE program in November.
The pound has jumped by a cent against the euro to trade at €1.1065 and over two cents against the dollar to $1.6543.
Mark O’Sullivan, director of dealing at foreign exchange firm, Currencies Direct said: “Following Mr King’s speech overnight, sterling rallied across the board in early morning trading, albeit from extremely oversold conditions.
“However it’s important not to throw caution to the wind. With the November inflation report still to come, we can’t safely say we have seen the last of any increase in the QE program yet.”
“There is some expectation in the market that inflation will move higher in the coming months and this may force the Bank’s hand to eventually raise interest rates.”
Official figures on Friday are expected to show the UK returning to modest growth after five quarters of recession but Mr King said: "We should be under no illusion that the path to a sustained recovery will be smooth and painless."