British retail sales unexpectedly expanded in July and signaled that consumers were taking the prospect of Brexit in their stride for now, helped by firm wage data and modest inflation pressures, according to data released earlier this week.

"This suggests consumer spending is still holding up and still supporting the economy even though overall output contracted in the second quarter," said Marshall Gittler, chief strategist at ACLS Global.

"It ties in with the relatively high wage growth that we saw earlier in the week."

Further fueling demand for the British currency, especially against the euro this week, was growing momentum to try to stop Prime Minister Boris Johnson from taking Britain out of the European Union at the end of October without a deal.

Against the euro, the pound scaled a 11-day high against the single currency, up 0.5% at 91.45 pence.

Versus the dollar, the pound rose for a second consecutive day, up 0.3% at $1.2121 and is poised for its biggest weekly rise since late June.

The opposition Labour party said it would call a vote of no-confidence in Johnson's government as soon as it believes it can win it and seek to form a temporary government under leader Jeremy Corbyn to delay Brexit.

While derivatives indicate market players may be trimming back some short sterling positions, the currency's prospects remain clouded by the risk of Britain exiting the European Union without a divorce agreement.