Sterling strengthened against the dollar on Thursday on the back of surprisingly strong British housing data and after Bank of England policymakers said inflationary risks remain to the upside.
The pound vaulted back above $2 to a fresh two-month high against the dollar early in the day after Nation-wide Building Society data showed the fastest pace of house price gains in June for over two years, strengthening bets on further BoE interest rate increases.
Comments from BoE Governor Mervyn King that inflation is coming down and consumer spending is showing signs of starting to soften prompted sterling to ease back slightly from that earlier two-month high.
But the overiding message from King and the other Monetary Policy Committee members testifying to a parliamentary committee was that inflation risks remain to the upside and that the MPC will not hesitate to act in order to keep inflation expectations anchored.
At 1415 GMT the pound was up 0.15 percent on the day at $2.0025, having traded as high as $2.0043 shortly after the housing data. The euro was flat at 67.25 pence.
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