LONDON: Sterling built on this week's gains against the euro on Wednesday after comments from the Bank of England's Martin Weale that reinforced his view of a more robust economic recovery and gradually higher interest rates next year.
Weale has been more explicit in leaning toward a rise in rates next year than many of his colleagues. He said signs that wage growth was picking up bode well for an economy in which rates could not stay at record lows forever.
That helped sterling gain another 0.4 percent against a euro weakened by signs that European policymakers are moving closer to more easing of monetary policy.
The pound also rose 0.2 percent against the dollar, pushing through resistance around $1.6550 in afternoon trade.
"We definitely got a bit of a boost from Weale this morning," said Graham Davidson, a spot currency dealer at NAB in London. "He may be seen as a hawk on the BoE council, but it has got the pound a little bit bid."
Sterling has looked shakier this month after pushing higher since the middle of last year on expectations that a stronger economy would lead the BoE to raise interest rates well before its European and U.S. peers.
A steady drop in UK inflation, which continued in February data on Tuesday, highlighted the doubts that remain over the structure of British growth, largely founded so far on consumer borrowing and housing markets.
After widening markedly on Tuesday, the spread between the 10-year British government bond and its German equivalent was little changed on the day at 113.3 basis points.
Gilt prices tracked gains in German Bunds and U.S. Treasuries, with the 10-year gilt yield falling more than a basis point to around 2.695 percent in afternoon trading.
Against the euro, attention is increasingly focusing as much on policy in Europe as in Britain. Bundesbank President and member of the ECB Governing Council Jens Weidmann said on Tuesday it was not "out of the question" for the ECB to buy bank assets to fight deflation - a softening of the German central bank's strict stance on the issue.
Any further easing of ECB policy would be expected to weaken the euro against its major peers and the single currency fell to 83.25 pence in afternoon trade.
"There is certainly more room for the pound to gain from here, but I think we will get stuck again, all it is doing is taking us back into the middle of the range we have seen since February," said another dealer with one bank in London.
"If anything breaks us out of this it may be the ECB's meeting next week."
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