FX round-up: Pound edges higher amid Brexit optimism, more caution on Fed path in 2018

Thus, by the close of trading cable was ahead by 0.21% to 1.3337 while in the background the US dollar spot index was at a roughly two-month low, having erased 0.47% to change hands at 92.78.

To take note of, in an interview with Bloomberg one of the Monetary Policy Committee's new members, Silvana Tenreyro, said two more increases in Bank Rate would be probably be needed over the next three years to bring inflation back down to the Bank of England's 2.0% target.

In her remarks, Tenreyro emphasised the possible implications for inflation from a reduced potential rate of growth resulting from the UK's exit from the Europen Union.

"People up until recently thought that Brexit meant monetary policy would remain highly accommodative and interest rates would stay low forever," she said.

"But Brexit might present other challenges that require the opposite. It might require an adjustment either way, and it's not obvious. That's something to be prepared for."

It was against that backdrop and evidence in surveys that wage pressures - which take time to feed through - were building that she backed calls for a rate hike at the MPC's last meeting.

In terms of economic data, the main release on Friday was the German IFO institute's business confidence gauge for November, which climbed a to a fresh record high of 117.5 (consensus: 116.6).

According to Barclays, Friday's IFO print was consistent with their forecast for German GDP growth of 0.6% quarter-on-quarter over the final three months of 2017.

Nevertheless, the spotlight in markets was on the ongoing talks between that country's main political parties as they attempted to forge a stable government.

Significantly, it was revealed that the Freedom party quit talks with the caretaker government led by the CDU/CSU and the Greens on 19 November due to Chancellor Angela Merkel's reduced opposition to the Greens' push for more funds to be made available to the rest of the EU.

The euro closed at 1.1933 on its cross against the US dollar on Friday.