This week has seen more positive news surrounding the pound due to the Conservative Government coming across as more unified and stronger.

Mainly down to the fact that the first round of Brexit talks has now been completed and backbench MPs have rallied around Prime Minister Theresa May. 

Still, many believed the pound would have risen higher following the successful round of Brexit talks and Theresa May felt the country was enjoying a “new sense of optimism” after breaking the deadlock of Brexit.

The pound is likely to be affected this morning by the inflation rate announcement from the Office of National Statistics.

November’s Consumer Price Inflation (CPI) has risen to 3.1 per cent its highest since 2012 even though economists expected it to hold at 3 per cent.

This is unhappy news with Christmas just around the corner as well as for the value of the pound. 

David Lamb, head of dealing at FEXCO Corporate Payments, said regarding inflation rising: “The currency markets are becoming increasingly wary of the Governor’s position. Even when the Bank notched up interest rates in November, the half-hearted hike left Poundwatchers underwhelmed and sterling slid as a result."

The Bank of England (BoE) raised interest rates in an attempt to stem rising inflation but expects have said this will take some time to take an affect on the economy. 

Laura Parsons, currency analyst at TorFX said regarding the exchange rate: “Although Prime Minister Theresa May asserted that last week’s exit deal had given Brexit negotiations a new sense of optimism, the Pound still spent Monday drifting lower against most of the majors. 

“GBP/EUR is currently trading in the region of €1.133 but Sterling could bounce higher today if U.K. inflation data surprises to the upside and the ZEW economic sentiment survey shows a decline in confidence.”

With regards to the dollar Elias Haddad, a senior currency strategist at Commonwealth Bank of Australia told Pound Sterling Live: “GBP/USD has scope to edge higher over the coming week. Faster UK wage growth on Wednesday can further underpin GBP.”

The pound to dollar rate seems to be dominated by the ONS data to be released later on today. 

Viraj Patel, a strategist at ING Group said: “The Bank of England meeting is probably now the standout event this week; while we suspect the statement will be largely unchanged, it’ll be interesting to see whether the MPC explicitly acknowledge the recent Brexit progress. 

“If so, one could see this as a hawkish development – with risks GBP/USD moves up to 1.3500/50.”