Sterling rose against the euro on Thursday close to a 10-month high on Thursday as investors focused on the euro's political concerns as European Union leaders met to broker a budget deal. Sterling traded steady versus the dollar after briefly ticking down against both the greenback and the single currency after data showed the weakest annual rise in UK retail sales in more than six years.
"The euro still has some risks to face and many people think the summit will fail," said Marios Maratheftis, currency strategist at Standard Chartered in London.
At 1407 GMT, sterling rose 0.2 percent against the euro to 66.35 pence, close to a 10-month high around 66.30 pence.
Against the dollar, it traded steady at $1.8205.
The Office for National Statistics said UK sales rose 0.1 percent last month, as expected. That brought the annual rate of increase down to just 1.3 percent, its lowest since January 1999 and weaker than the forecast for a 1.7 percent rise.
"The data told the market what it already knows. All what we have seen this week increases the chances of a UK rate cut," said Ian Gunner, head of foreign exchange research at Mellon Bank.
Data earlier this week showed British house prices fell at their fastest pace in more than 12 years in the three months to May.
The data added to market speculation that the next interest rate move in Britain would be a cut. But Bank of England Governor Mervyn King signalled earlier this week the central bank might not be sure, saying that risks to inflation were on both sides.
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