Sterling hit a near five-month high against a trade-weighted basket of currencies on Friday, supported by expectations of a Bank of England interest rate rise next week and at least one more hike by year-end. However the pound's gains proved short lived versus the euro, with the single European currency rebounding as investors squared books on the last trading day of the month.
The quarter and the half year. UK data on growth, mortgage lending and consumer confidence on Friday, pointed to a reasonably buoyant economy, keeping intact expectations for a rate hike to 5.75 percent next week.
"The markets are anticipating another round in the tightening cycle next week and that's continuing to keep sterling pretty well supported," said Jeremy Stretch, strategist at Rabobank. But he added that with markets already pricing in rates of at least 6 percent by year-end there may be limited scope for further sterling gains.
Sterling rose to a two-month high of $2.0064, moving further above the key $2 mark towards April's 26-year peaks. On a trade-weighted basis it scaled a near five-month high at 105.2. The euro fell to 67.09 pence, its weakest since late February, before rebounding to 67.38 pence by 1400 GMT.
UK rate hike expectations got a sharp boost last week after BoE minutes showed that four of the nine policymakers had voted for a rate hike, dissenting from this month's on-hold decision. Fifty-six of the 70 economists polled by Reuters after the minutes forecast a July rate hike with the rest choosing August.
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