Sterling rose by a quarter of a percent on Thursday thanks to a weaker dollar but gains were capped before retail sales data that may decide market expectations for a rate hike as early as August.
Though data has been broadly mixed in recent days, with inflation data for May this week below forecasts, expectations of a rate hike in August are around the 40 percent mark, according to swap market pricing.
Headlines from the Brexit withdrawal bill tabled before parliament this week have also offered some support to the beleaguered British currency with analysts interpreting the results as pointing towards a softer Brexit.
Lawmakers supported the government's position to reject amendments to the EU withdrawal bill that challenged May's commitment to leave the bloc's customs union and single market.
Sterling rose a quarter of a percent to $1.3410, cementing some modest gains notched up this week. Against the euro, sterling was broadly flat at 88.14 pence.
Of more immediate focus for markets is retail sales data for May which is expected to show a pick up in growth of 2.4 percent on an annualized basis, compared to an April print of 1.4 percent.
ING analysts said sterling is set to strengthen against the euro if data beats forecasts.
An index measuring economic surprises in the UK is at its lowest levels since August 2017. REUTERS RSU 1313
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