Tuesday, March 25 15:57:09
Sterling firmed against a weaker euro today after European monetary policy makers signalled the potential for further monetary easing to avoid deflation in the euro zone.
By 1521 GMT the euro was down 0.5 percent against the pound at 83.46 pence and on track for its biggest daily fall since February 12.
Bundesbank President and member of the ECB Governing Council Jens Weidmann said it was not "out of the question" for the ECB to buy bank assets to fight deflation, in a softening of the German central bank's strict stance on the issue.
Another ECB governing council member, Jozef Makuch, said deflation risks in the euro zone have risen and fellow policymakers are prepared to take decisive steps if needed.
"There's a drumbeat for quantitative easing from the ECB which is setting us up for a lower euro," said John Hardy, head of currency strategy at Saxo Bank in Copenhagen.
Traders will listen to a speech by Weidmann in Berlin at 1630 GMT for further hints on the interest rate outlook.
Sterling gained against the dollar after data showed British consumer inflation for February slowed as expected, disappointing some who had positioned for a weaker reading.
The pound was trading up 0.2 percent at $1.6528, not far off its lowest level since February 12, touched in the previous session.
The British currency has fallen around 1.3 percent this month, pressured by Federal Reserve chief Janet Yellen's hint last week that U.S. interest rates could rise early next year.
Traders are watching economic data for more clues on the outlook for monetary policy and, therefore, sterling strength.
The latest retail sales numbers painted a mixed picture.