Sterling fell against the yen and the dollar on Friday as investors took profits on the pound after a week of strong gains. The pound's gains of around 1 percent this week on a trade-weighted basis were driven by increased confidence the Bank of England will raise rates this quarter, following strong retail sales data and above-consensus consumer price inflation.
On Friday, investors locked in some of these gains ahead of the weekend in the absence of any market moving news. "We've had a reasonable run and people are just looking to take a little bit of money off the table in what are still relatively volatile times," said Jeremy Stretch, markets analyst at Rabobank. By 1451 GMT, sterling was down 0.4 percent against the yen at 231.12 yen. It was down 0.1 percent versus the dollar at $1.9622.
However, the pound held firm at 67.78 pence against a broadly weaker euro. The pound's recent strength has also been driven by a more benign global economic environment and a perception that US monetary authorities will act to protect growth, analysts said.
Next week, investors will focus on data from the UK housing market as well as Wednesday's final release of fourth quarter gross domestic product data. "If there is a revision of GDP its more likely to be up than down so it's possible that sterling will appreciate a bit," said Paul Robinson, sterling strategist at Barclays Capital.