The pound firmed against its major counterparts in European deals on Wednesday, as U.K. inflation improved more-than-expected in October and on news of progress in the Brexit trade talks.

Data from the Office for National Statistics showed that UK inflation accelerated to a three-month high in October driven by higher clothing and food prices.

Consumer prices advanced 0.7 percent on a yearly basis in October, faster than the 0.5 percent increase logged in September. The rate was forecast to rise marginally to 0.6 percent.

Month-on-month, consumer prices remained flat versus a 0.4 percent rise in September, and the expected drop of 0.1 percent.

Excluding energy, food, alcoholic beverages and tobacco, core inflation increased to 1.5 percent, while the rate was expected to remain unchanged at 1.3 percent.

Another report from the ONS showed that output prices declined for the eighth consecutive month in October.

Output prices decreased 1.4 percent annually but slower than the 1.7 percent drop seen in September. However, this was faster than economists' forecast of 0.7 percent fall.

Output prices remained unchanged on month, in contrast to a 0.1 percent drop a month ago and a 0.1 percent rise expected by economists.

Input prices also continued its downward trend in October. Input prices were down 1.3 percent on year following a 2.2 percent decline a month ago. Prices were expected to decrease 2.5 percent.

Month-on-month, input prices gained 0.2 percent after rising 0.3 percent a month ago. Inflation was forecast to slow to 0.1 percent.

Reports showed that Britain and the European Union could reach a post-Brexit trade agreement by the beginning of next week.

Britain's chief negotiator David Frost on Tuesday is said to have pinpointed 'a possible landing zone' between the EU and Britain in the seven days ahead, The Sun reported.

The pound recovered to 138.18 against the yen, from a low of 137.82 seen at 1:45 am ET. Next key resistance for the pound is seen around the 141.00 region.

Data from the Ministry of Finance showed that Japan posted a merchandise trade surplus of 872.899 billion yen in October.

That exceeded forecasts for a surplus of 250 billion yen following the 675 billion yen surplus in September.

The pound rallied to a 1-week high of 1.3298 against the greenback from Tuesday's closing value of 1.3243. The pound is seen finding resistance around the 1.34 mark.

The GBP/CHF pair hit a 6-day high of 1.2108, after falling to 1.2063 at 5:00 pm ET. The pound is poised to find resistance around the 1.22 area.

The pound rose to a 6-day high of 0.8938 against the euro, up from a low of 0.8958 set at 1:45 am ET. The pound may possibly challenge resistance around the 0.86 level.

Looking ahead, Canada inflation data, U.S. building permits and housing starts - all for October are set for release in the New York session.

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