The pound recorded solid gains against the euro on Friday (9 December), after a report showed Britain's trade deficit narrowed more than forecast in October.

The pound was broadly flat against the dollar, fetching $1.2593, but gained 0.58% against the euro, trading at €1.1923, after climbing almost 1% in the previous session against the common currency after the European Central Bank extended its bond-buying programme until at least December 2017.

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The gains came after the Office for National Statistics said the trade deficit in October narrowed to £1.97bn from £5.81bn ($7.3bn) in September, a figure which was revised upward from the previous £5.2bn.

"It's hoped the pound's weakness since Britain's vote to leave the European Union will continue to boost exports, encouraging the domestic production of goods here in the UK," said Colin Dewar, head of currency dealing at Hargreaves Lansdown.

Meanwhile, the UK construction sector suffered an unexpected slowdown in October, as output fell 0.6%month-on-month in October, compared with analysts' expectations for a 0.2% gain, while the 0.3% advance recorded in the previous month was revised up to show a 0.9% gain.

On a year-on-year basis, the construction sector saw output climb 0.7%, compared with analysts' forecast for a 0.1% drop, while the previous month increase was revised upward to show a 2.5% gain.

Elsewhere, the euro was also down against the dollar, losing 0.57% against the greenback to trade at $1.0554, while the US currency rose 0.96% and 0.28% respectively against the yen and the Swiss franc, to ¥115.05 and CHF1.0186.

The dollar, however, was largely flat against its Australian and Canadian counterparts as traders across the Atlantic awaited next week's Federal Reserve meeting, when the US central bank is expected to raise interest rates.

"The key to the meeting is likely to be how many rate hikes the Fed is forecasting for next year given that markets are currently only pricing in one by November, which I think is too few," said Oanda's senior market analyst Craig Erlam.

"Given the Fed's bullish forecast for four last year and the much improved conditions this time around, it will be interesting to see what approach they take."

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