Sterling rose on Thursday, shaking off the previous day's losses, helped by robust economic data and comments from the Bank of England's Andrew Sentance, who made reference to a rising pound offsetting inflation. British factory orders improved more than expected in February and firms expected to put up prices at their fastest pace in 2-1/2 years, the CBI's monthly industrial trends survey showed on Thursday.
The Confederation of British Industry survey's total order book balance rose to -8 this month from -16 in January, well above expectations of a reading of -14. "Today's price action has been driven by the market looking at the CBI data and thinking the real economy is doing relatively well, which could mean more MPC members moving into the hawkish camp," said Ray Farris, currency strategist at Credit Suisse.
Sterling traded with gains of around 0.5 percent versus the dollar at $1.6170. It was probing near-term resistance at Wednesday's high of $1.6185. The pound had fallen back around two US cents from that high on Wednesday as the Bank of England's inflation report downgraded the 2011 growth forecast and Governor Mervyn King took a less hawkish tone than the market had been anticipating. The euro traded down around 0.3 percent against the pound at 84.10 pence, not far from a four-week low hit earlier in the week of 83.56.
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