Sterling hit its highest level in 9 days against the euro on Friday, bounding back from recent 15-month lows after comments this week from the European Central Bank President shifted the relative interest rate outlook.
The ECB left its benchmark rate at 2.5 percent on Thursday as widely expected, but comments by ECB President Jean-Claude Trichet dented expectations of a eurozone rate rise in May that had previously boosted the single currency.
The Bank of England also left rates unchanged on Thursday, at 4.5 percent, and economists are divided over whether the next move will be up or down. But sterling fell against the dollar on Friday after data showing US unemployment at a 4-1/2 year low in March, as investors speculate over the extent of future US interest rates.
"The foreign exchange market is totally focused on interest rate differentials at the moment," said Adrian Hughes, currency strategist at HSBC.
"Trichet and payrolls were quite major triggers for the market, and there has not been much that is sterling-specific today."
Sterling rose as far as 69.52 pence per euro and was trading close to those levels at 1430 GMT, up slightly on the day.
The pound is up one percent from 15-month lows of 70.21 pence set on Wednesday and tested on Thursday, ahead of Trichet's comments.
Sterling was quoted at 97.90 on its trade-weighted index, up from its lowest since December 2003 of 97.50 hit early on Thursday.
But sterling fell more than half a percent to 3-day lows against the dollar at $1.7415 after data showing US employment at a 4-1/2 year low of 4.7 percent in March, and a slightly stronger than expected 211,000 increase in non-farm payrolls.
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