Sterling rose more than half a percent to 7-month highs against the dollar and hit its highest in three days against the euro on Friday, buoyed by broad dollar weakness and upbeat UK data.
The dollar hit 7-month lows against a range of European currencies on Friday in the aftermath of comments from Federal Reserve Chief Ben Bernanke and weak US data.
The pound was also supported after the GfK consumer confidence survey gave a better than expected reading of -4 in April, up from -7 in March. "The GfK was a bit better than expected, and we have dollar weakness across the board after the news flow of yesterday," said Adrian Hughes, currency strategist at HBSC.
Sterling was trading at its highs of $1.8133 at 1350 GMT, a gain of 3 cents over the past two days.
The dollar's losses started following the G7 finance ministers' meeting at the weekend, and accelerated after Bernanke hinted on Thursday at a pause in Fed rate rises.
The US economy grew at its strongest rate in 2-1/2 years in the first quarter, but below forecast, data showed on Friday, while employment costs rose at the slowest pace in seven years.
Sterling was trading close to earlier highs of 69.33 pence per euro, up a quarter percent from the US close and a halfpenny above three-week lows set on Thursday.
Earlier on Friday, the National Institute of Economic and Social Research revised up its growth forecast for 2006 to 2.5 percent from 2.3 percent predicted in January.
British retailer John Lewis Partnership said on Friday that weekly department store sales were up 2.8 percent in the week to April 22, but added the figures were distorted by the timing of Easter.
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