The pound to euro exchange rate has remained steady since yesterday morning.
The rate currently stands at 1 GBP to €1.130, holding steady over the past 24 hours at this week-long high.
However, experts are warning that the currency could plummet if the British high street reports a bad performance over December.
TorFX currency analyst Laura Parsons said: “The GBP/EUR exchange rate remained trading above €1.130 on Thursday, but the pairing could fall before the weekend if the UK’s retail sales report details a slide in consumer spending in December.
“That being said, GBP/EUR losses could be limited as the euro is likely to remain under pressure ahead of next week’s European Central Bank (ECB) rate decision amid concerns that persistently weak inflation in the currency bloc will keep policymakers dovish on the subject of tightening monetary policy.’
Yesterday’s boost to the pound was thanks to hopes that UK wages would grow.
Ms Parsons also credited the lift in the pound to the Bank of England.
She said: “Bank of England (BoE) official Michael Saunders gave the pound a lift when he asserted that average earnings will increase.
“It’s likely that interest rates will need to keep rising over time.
“He added that the central bank will be ‘gradually lifting our foot off the accelerator, with no need to put the brakes on’.
“Meanwhile, the euro struggled after the Eurozone’s latest inflation report confirmed that consumer price pressures moved further away from the European Central Bank’s (ECB) 2 per cent target.”
What is more, the pound could rise further today.
“The GBP/EUR exchange rate was able to push above €1.130 and could extend gains today if ECB officials adopt a dovish attitude to monetary policy in the plethora of speeches set to be delivered this afternoon,” Ms Parsons added.
Thankful political discord in Germany has led to the pound’s performance increasing slightly earlier this week.
Ms Parsons said: “Germany’s coalition deal suffered a setback, with the Berlin branch of the Social Democrats voting against forming a grand coalition with Angela Merkel’s CDU/CSU.
“The GBP/EUR exchange rate could extend gains today if the Eurozone’s consumer price index confirms that inflation moved further away from the European Central Bank’s (ECB) 2 per cent target.”
