Tags: Pound to euro, pound euro, MPC, UK inflation data, exchange rate, sterling,

The pound to euro is 0.02 pct higher at 1.2410 at 15:00 in London.

Sterling bounced off its lows against the euro on Friday and could head higher this week as long as Spain keeps us waiting.

"This week brings a busy data calendar from the UK, so there is plenty of domestic risk. UK inflation data is set to be weak and there is scope for some dovish leanings within the MPC minutes," advises Richard Driver at Caxton FX.

Nonetheless, the euro faces plenty of pressure given that hopes of an imminent Spanish bailout appear to have been dashed.

"We have argued for while that a bailout request wouldn’t surface until the Spanish regional elections on October 21 but reports this morning are suggesting we may have to wait until November," says Driver.

Sterling is trading at €1.24 and sterling should be able to avoid further major losses this week.

"1.2350 should be as low as this pair goes," says Driver.

Elsewhere, the pound dollar rate is still trading above $1.60 but speculation surrounding further QE from the BoE should cap gains.

Friday brought a remarkably positive US consumer sentiment survey, the best in five years. We are seeing evidence of a bounce in the US economy after its slump in the middle of the year.

This afternoon’s US retail sales numbers look set to add to this somewhat brighter picture.

The prospect of a weak UK inflation figure tomorrow could be creating some caution around the pound, with speculation surround more UK QE on the rise. 

"As long as EUR/USD runs out of steam at $1.30, this pair is likely to struggle to make any real headway from the $1.60 level but for now, sterling trades half a cent higher," says Driver.