Sterling nudged up towards recent 15-month peaks against the euro on Friday, after robust British service sector data reinforced expectations of a rate hike next week and perhaps more monetary tightening in 2007.
However sterling lost ground against a broadly rallying dollar after a strong US jobs report and non-manufacturing survey from the Institute for Supply Management. In Britain, the CIPS/RBS services PMI hit a six-month high of 59.3 in October from the previous month's 57.0, giving one of the highest readings in the survey's 10-year history and far outstripping a consensus forecast of 56.7.
Analysts said the data supported a view that the British economy is strong enough for the Bank of England to raise interest rates to 5 percent next Thursday. "I think we are likely to see the BoE hiking rates by 25 basis points but that is pretty much already priced in... and at the moment the market is staring to speculate that we could see some further rate hikes beyond that, and that is providing some sterling support," said Ian Stannard, senior foreign exchange strategist at BNP Paribas.
By 1454 GMT, sterling was 0.1 percent firmer at 66.84 pence per euro, nudging towards a 15-month peak of 66.67 reached on Tuesday. The pound also hit an eight-year high of 224.37 yen. On a trade-weighted basis, sterling consolidated around 103.7, within sight of 2-year highs of 103.9 hit earlier in the week. Against the dollar though, it fell 0.4 percent to $1.9004, retreating more than a cent from session highs.
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