The pound rallied against its major rivals in early deals on Tuesday as domestic equities rose in thin pre-holiday trading, although gains were capped due to market holidays across Europe.
The U.K. and French markets will close around mid-day for New Year's Eve, while many markets including Germany, Switzerland and Italy are closed for the full day.
The Euro Stoxx 50 index of Eurozone bluechip stocks is edging up marginally, while the Stoxx Europe 50 index, which includes some major U.K. companies, is moving up 0.3 percent. France's CAC 40 is gaining 0.2 percent and the U.K.'s FTSE 100 is adding 0.3 percent.
Following disappointing U.S. pending home sales data released yesterday, investors await reports on consumer confidence and housing due out later in the day for further clues on the health of world's largest economy.
Elsewhere, the People's Bank of China vowed to maintain appropriate liquidity and continue a prudent monetary policy. Following the fourth quarter monetary policy committee meeting, the PBoC reiterated that it would keep the yuan basically stable.
The central bank said it will push forward interest rate and exchange rate reforms. The bank added that it will bring about the reasonable growth in credit and social financing.
The pound advanced to 0.8317 against the euro and 1.4741 against the Swiss franc around 4:00 am ET, its highest levels against both of them since December 05.
On the upside, the pound-franc pair may find target around the 1.4780/85 area. With the 400-day SMA being broken in the euro-pound pair, the next likely resistance for the sterling is seen around the 0.8290 level.
The British currency rose to multi-day highs of 173.88 against the yen and 1.6546 against the US dollar, improving from Asian session's 4-day low of 172.82 and a session's low of 1.6474, respectively.
If the pound extends its rally, likely resistance levels are seen at 1.6580 against the greenback and 176.0 against the yen.
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