Sterling rose 1 percent against the dollar on Friday on declining expectations of US rate rises and along with strong UK data. The Fed's statement on Thursday accompanying its quarter-point rate rise triggered a sell-off in the dollar, as markets scaled back rate rise expectations.
The sell-off gathered pace on Friday after an in-line reading in the core US PCE index in May, the inflation gauge most closely watched by Fed policymakers.
Sterling was also lifted by an upward revision in first quarter UK growth, released earlier in the day.
"Sterling got a boost from the GDP and the dollar is under pressure," said Naeem Wahid, currency strategist at HBOS.
"If data coming out of the US are not hawkish for inflation, the markets are taking that as another signal that the Fed won't have to go," Wahid said.
Economic growth in the UK was revised up to 0.7 percent on the quarter on a higher estimate for business activity. Growth in 2005 and the years back to 2001 was also revised up, implying a lower output gap than previously thought.
GfK NOP's monthly consumer confidence barometer rose to -4 in June from -5 in May, exactly in line with analysts' expectations.
"The numbers are better than expected. Better growth argues for more momentum in the UK economy and that argues for a rate rise, which is supportive of sterling," Tony Norfield, head of foreign exchange research at ABN Amro, said.
At 1417 GMT, sterling was trading near earlier one-week highs of $1.8464, up two percent from two-month lows hit on Thursday.
It strengthened to 69.15 pence per euro, compared with earlier two-month lows of 69.46.
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