Sterling rose to a five-day high after British retail sales jumped for the second month in a row in May and far outstripped expectations.
Sterling is likely to gain this year and by the time Britain leaves the European Union next March will have recouped a chunk of its losses since the June 2016 decision to leave the bloc, a recent poll suggested.
However, the pound is unlikely to re-test the levels above $1.43 it traded at earlier this year when the Bank of England was expected to raise interest rates in May. Instead, the bank left rates unchanged.
The currency is down around 10 percent since Britons voted to leave the EU, trading, but some of those losses will be wiped out on expectations for rate hikes and a good divorce deal with the EU, according to the poll.
Lawmakers will vote next week on Prime Minister Theresa May’s Brexit blueprint. The vote may increase the probability of a “soft” Brexit, helping the pound. But it might also cast doubt on whether May will remain in charge, and her departure would probably weaken sterling.
The euro today was heading for its worst weekly loss in 19 months after a cautious European Central Bank signalled it will keep interest rates at record lows well into next year.
Following a closely-watched meeting on Thursday, the ECB said it will end its massive bond purchase scheme by the end of this year, taking its biggest step towards dismantling crisis-era stimulus.
The ECB also indicated that it would keep interest rates steady at least through the summer of 2019, reflecting the uncertainties hanging over the eurozone economy.