Sterling recovered from a five-month low versus the euro and rose against the dollar on Wednesday, helped by better UK data while worries over the eurozone's debt crisis weighed on the euro. Concerns about a fragile UK economy and expectations that UK interest rates will rise later than those in Europe were expected to limit sterling's gains, however.
The pound advanced as high as $1.6083 versus the dollar after data showed UK service sector output rebounded in January. A survey also showed retail sales rose in March, raising hopes the economy may have picked up in the first quarter. Sterling was up 0.17 percent against the dollar at $1.6042, having dropped to a low of $1.5837 earlier this week.
The euro was down 0.25 percent on the day, at 87.85 pence, retreating from a five-month high of 88.365 pence struck on Tuesday. The pound also rose against the yen to its highest in more than two weeks, at 133.65 yen. The Japanese currency has come under broad pressure, hitting 10-month lows against the euro and touching its lowest level in nearly three weeks versus the dollar as interest rate differentials widened in favour of US and European currencies. Despite its bounce, however, traders remained sanguine about its prospects.