The pound may extend its euro gains into a third consecutive day following reports that the pace of inflation has increased and unemployment fallen.

In early currency trading on Thursday the pound was worth 67.20p against the euro from 67.22p yesterday and at $1.9668 from $1.9685 previously.

The figures increased speculation that the Bank of England may increase interest rates a further quarter point in the new year.

Unemployment fell at its fastest for almost two years in November, while consumer price inflation rose to a nine-year high, driving sterling to the biggest two-day gains since September 13th.

"Sterling is going to remain well supported given the strong UK economic data we've seen over the past couple of days," said Ian Stannard of BNP Paribas.

"We'll see some further euro-sterling weakness developing," he told Bloomberg. 

Sterling gains could be limited on an Office of National Statistics report due today finding that retail sales growth fell in November after
0.9 per cent growth in October.