Sterling hit a three-week high against a weakening dollar on Tuesday before paring gains on a brief security alert in central London. The currency was little moved by slightly weaker-than-expected retail sales figures from the Confederation of British Industry (CBI), which cemented expectations of an interest rate cut later this week.
Sterling showed sensitivity to security concerns - dropping briefly against the dollar as police sealed off an area in central London on reports of smoke coming from a bus.
Police later stood down from the incident but markets remain jittery after the July 7 deadly bomb attacks on London's transport system.
"I guess we had all feared that because of the bomb attacks in London that the (CBI) distributive trade report would fall off significantly. It didn't do so and therefore it was a relief," Hans-Guenter Redeker, chief fx strategist at BNP Paribas, said.
At 1515 GMT, sterling traded at $1.7710, slightly higher on the day, after hitting $1.7753 earlier in the session, its highest level since July 13.
Versus the euro sterling was broadly steady at 68.92 pence.