LONDON (Reuters) - The pound rose slightly against the dollar on Thursday as traders factored in higher Bank of England interest rate expectations in light of recent inflation and wage data, while awaiting retail data due Friday.
At 1024 GMT, sterling was up 0.08% at $1.2743.
The pound was at its firmest in a month against the euro, with one euro worth 85.38 pence.
Interest rate expectations have ticked higher this week after data on Tuesday showed British wage growth at a record high, and the latest inflation figures showed core prices coming in hotter than expected on Wednesday.
"We had data releases this week which were obviously supportive for the pound, clearly pointing to more tightening by the Bank of England with markets now pricing a 6% rate in the UK again," said Francesco Pesole, FX strategist at ING.
Traders are predicting around an 88% chance of a 25 basis point hike from the BoE at its next meeting on Sept. 21.
So far this week, the pound is up 0.4% against the dollar and up 1% against the euro.
The BoE raised interest rates for the 14th time since late 2021 on Aug. 3 as it continued to try to calm inflation.
"The pound is now enjoying that period after the positive repricing of rate expectations, and probably should find some good support for now," said Pesole.
The week will wrap up with UK retail sales for July, with traders looking for signs of how well consumption is holding up.
A slump in retail sales is expected, an outcome that will likely weigh on the pound in the short term.
"Those should move the market...however, what matters is wages and service inflation were both higher than expected, retail sales will not do much to dent that new found strength," said Pesole.