Sterling fell sharply against a broadly firmer euro on Thursday but rose to a one-month high versus the dollar, helped by speculation UK interest rates may rise sooner than expected and on weaker US data. The Bank of England kept rates at a record low of 0.5 percent as expected on Thursday.
Money markets are pricing in a rate hike by the end of the year but with a growing chance it could be as early as May and the minutes of the BoE's meeting, due on January 26, will be watched closely. Sterling rose more than half a percent to a high of $1.5885 versus the dollar, its strongest since December 14. Traders said stop-loss orders were triggered on the break of $1.5800 and then $1.5850.
The dollar also came under pressure after a jump in weekly US jobless claims pointed to a lacklustre economic recovery. Technical analysts said the outlook for the pound had been boosted by Wednesday's close above the 100-day and 55-day moving averages for the first time in a month, coming in on Thursday at $1.5721 and $1.5750 respectively. Sterling ceded more than 1 percent against the euro, which rose to 84.25 pence, its strongest in nearly a week.