LONDON: Sterling edged towards 4 1/2-year highs against the dollar on Tuesday, buoyed by favourable comments on Britain's economy from Bank of England Governor Mark Carney before what is expected to be robust first-quarter growth data.
Sterling was up 0.2 percent at $1.6840, not far from Monday's peak of $1.6858, with chartists citing near-term resistance around the November 2009 high of $1.6877.
A break above that could see sterling rise to $1.70, traders said.
Driven by an improving economy that has outpaced its peers in Europe, the pound has gained more than 10 percent against a basket of currencies since March last year.
It has also been buoyed by signs of merger activity that may require big companies to buy the currency.
US drugmaker Pfizer confirmed on Monday it wanted to buy AstraZeneca in a deal that could value its smaller British rival at more than $100 billion.
For now though, eyes were on the first-quarter gross domestic product data due at 0830 GMT.
Hopes of a good number got a boost after Carney said in an interview published on Tuesday that the economic recovery was starting to broaden and there are early signs it will be sustainable.
Forecasts are for 0.9 percent growth in the quarter, up from the fourth-quarter performance of 0.7 percent and the fifth successive quarter of expansion.
That would leave annual growth at 3.2 percent, and add to expectations that the BoE may have to raise rates early next year.
"This would further help bullish sterling sentiment which, together with Pfizer/AstraZeneca-related sterling demand, could see sterling back above $1.6850 and targeting its $1.6877 high from November 2009," said Tom Levinson, currency strategist at ING.
Against the euro, sterling was slightly firmer.
The euro was down at 82.38 pence, with traders likely to sell the common currency with the UK growth data set to highlight the diverging fortunes between the British and euro zone economies.
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