LONDON: Sterling rose against the dollar and the euro on Thursday ahead of growth figures for the third quarter due on Friday which could point to an economic recovery taking hold in Britain.
The pound also benefited from a dollar hit by the fading prospects of the US Federal Reserve's reducing its stimulus this year following weak US jobs data released earlier this week.
The British currency was up 0.2 percent at $1.6198. It had hit a three-week high of $1.6258 in the previous session and was expected to face stiff chart resistance at $1.6260, its Oct. 1 high, and towards $1.63.
Preliminary gross domestic product (GDP) data from Britain is due on Friday and is expected to show the economy grew by 0.8 percent in the third quarter, compared with the previous three months.
"Everybody has taken on board that the Q3 (growth) numbers will look good and the BoE in their minutes yesterday hinted they also think the Q3 numbers looked better than they had anticipated," said Adam Cole, global head of FX strategy at RBC Capital Markets.
"The question really now is how much momentum carries forward into Q4."
The BoE minutes on Wednesday showed policymakers were increasingly confident of a robust UK recovery and were comfortable with a firmer exchange rate.
Strategists said dips to $1.6170/80 would be bought into for a move to $1.6250 and Friday could see sterling target $1.6350.
However, Cole added that sterling's ascent would likely be driven more by dollar weakness than domestic UK factors.
"There has been a lot of good news recently in sterling and that dynamic is fading, not to become negative but to become more neutral. The dollar is the main driver and we do think there is a bit more downside for the dollar from here."
Markets will pay attention to the UK CBI factory orders index for October set for release at 1000 GMT. Expectations are for a reading of +10, beating September's +9, which was the highest since August 2007.
"Today, the CBI Trends survey will be important, where market expectations are for strong readings," analysts at Morgan Stanley said in a note to clients.
"Disappointing CBI readings today would likely keep sterling/dollar capped by the previous $1.6260 highs. But a move below $1.6115 will be needed to trigger a bearish signal."
Sterling also recovered against the euro after touching a near two-month low in the previous session, when concerns about tighter monetary policy in China cut into riskier currencies.
The euro was down 0.1 percent at 85.12 pence, having hit 85.315 pence in the previous session, which was its highest since late August. Chart resistance was cited at 85.35 pence, the 200-day moving average.
The common currency was under pressure after private sector activity surveys showed the pace of growth in euro zone business eased unexpectedly this month, suggesting the region's recovery was still fragile.
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