The pound has started the year in a buoyant mood and the outlook for the UK economy is looking positive. The hangover of the last few years may take a while to shake off but with some tender loving care – and more bad news from Europe, 2014 may be the start of some better times.

By Luke Trevail of TorFX

Across the board sterling has continued to improve since the Christmas break, posting multi-year highs against a glut of currencies.

Importantly, the key level of €1.20 is within our sights and as long as the Bank of England stay away from talk of further Quantitative Easing when they meet later this week and keep up the positive slant that interest rates will be raised if UK unemployment goes below 7% then breaking through this barrier could be seen.

News of the single-currency’s economic situation has been patchy at best recently, and with Angela Merkel injuring herself in a skiing accident this week, the Germans will no doubt bury their heads in the sand, or snow perhaps until she is back on her feet.

The New Year is a time to make resolutions, and I suspect that George Osborne and Mark Carney at the Bank of England will be hoping for much of the same. The Europeans, however, may have a more difficult time in deciding what is the best plan of action for to sort out the situation that they find themselves in. Cut the rot and plan to mop up the mess would be my suggestion but this will be fraught with problems that I suspect will detrimental to the euro.

These market are never predictable, and volatility will still be a key factor but rest assured it does seem that those who’ve been waiting for prices over €1.20 will be rewarded soon and those who’ve yet to sell euros that they’ve been holding onto are urged to repatriate them soon, before the pound sails away and the euro potentially sinks.

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