Sterling rose towards last week's 2-1/2 month high versus a broadly weaker dollar on Thursday, in part buoyed by a robust British house price survey. However the pound slipped versus the euro, which gained across the board as the European Central Bank reinforced market expectations that a June rate rise is likely after it left borrowing costs on hold on Thursday.
A report from the Royal Institution of Chartered Surveyors showed British house price inflation unexpectedly picked up in March after four months of easing.
The survey boosted expectations that the Bank of England might soon follow up on its three interest rate hikes since August 2006 to tame inflation. Positive effects were somewhat offset by data showing the UK trade deficit widened more than expected in February. While the data showed strong domestic consumption was continuing, it also indicated exporters were being hampered by the pound's strength.
"The RICS survey was a mild positive. One more rate hike is priced in and that's probably fair. The housing (slowdown) concern that the BoE was hinting at, if that went away we could potentially see two hikes," said Naeem Wahid, currency strategist at HBOS Treasury Services.
"The move against the dollar is about dollar weakness in general. (Euro/sterling) went a little bit higher after the trade data," he added. By 1410 GMT, the pound was up 0.2 percent at $1.9790, approaching the 2-1/2 month high of $1.9822 set earlier this month. Against the euro it was down 0.2 percent on the day at 68.08 pence.
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