The sterling is heading higher in currency trading, receiving a shot of strength from M&A news. The big deal today is that Cadbury has finally agreed to Kraft's buyout offer.

Another boost to the U.K. pound in forex trading came with the latest CPI readings, indicating that inflation is on the rise. GFT's Boris Schlossberg explains in FX360 why the Bank of England is in a tough place now:

Although the hotter inflation data may be partially a function of one-off base effects, it nevertheless creates a serious problem for the BOE which on the one hand is mandated to maintain price levels below 2% and on the other is still in the midst of pursuing its quantitative easing program which is highly dilutive to the currency.

Central banks have a delicate balance to maintain with monetary policy, and it is important for them to do their best to regulate what goes on.

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• Sterling in Currency Trading
  Forex trading on the currency market