LONDON: Sterling rose on Friday, helped by a Bank of England policymaker who stopped calling for more stimulus this month saying Britain's economy was on course for a more self-sustaining recovery.
BoE Monetary Policy Committee member David Miles told Reuters a turnaround in the economy was the main reason he had dropped his call for further bond buying. He reiterated that a strong pound would help bring down inflation.
The comments came after BoE minutes earlier this week showed no policymakers saw a case for more stimulus, which contrasted with the US Federal Reserve's unexpected decision not to scale back its bond-buying programme.
Sterling was up 0.2 percent at $1.6063, holding above solid chart support at $1.60, with traders reporting bids around that level.
"Sterling has bounced back after yesterday's weak retail sales numbers ... There is an increasing risk that the Bank of England will raise interest rates before the Fed as well as before the European Central Bank," said Kit Juckes, currency strategist at Societe Generale.
The pound has been strong recently as firmer-than-expected UK data has led investors to bring forward expectations of when they think the central bank will raise interest rates.
But weaker-than-expected UK retail sales data on Thursday tempered the rally.
The pound stayed below an eight-month peak of $1.6164 hit on Wednesday after the Federal Reserve announcement.
Traders and analysts said momentum indicators such as the relative strength index suggested the pound may have been overbought and could be due a retracement.
"Sterling remains highly sensitive to negative UK data shocks, as highlighted by Thursday's weak retail sales data. This is likely a function of sterling's current overextended position," analysts at Morgan Stanley said.
However, they maintained a "near-term tactical long position" after Miles' comments and the BoE minutes.
The pound also rose against the euro, which fell 0.1 percent to 84.29 pence but held above an eight-month low of 83.525 pence struck on Wednesday.
Strong chart support for the euro was seen at 83.33 pence, a level which equates to 1.20 in sterling/euro. This is a level where UK importers often look to sell the pound.
Sterling showed little reaction to figures showing a smaller-than-expected deficit in August, which added to signs of improvement in the economy.
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