LONDON (Reuters) - The pound edged up on Thursday, after UK finance minister Jeremy Hunt's spring budget offered a raft of tax cuts, but little in the way of surprises for the market, leaving more focus on the direction of the U.S. dollar.
Sterling rose 0.2% to $1.276, its highest in around a month, and nudged into positive territory against the euro, to 85.40 pence.
In his budget on Wednesday, Hunt trimmed national insurance contributions by 2 pence in the pound but stuck to a fiscally cautious mandate that eased anxiety about Britain's $3 trillion debt burden, boosted consumer stocks and helped the pound stay robust against other major currencies.
The firmness in sterling by Thursday was less a product of the UK fiscal outlook and more that of a decline in the dollar after U.S. Federal Reserve Chair Jerome Powell told lawmakers rate cuts will "likely be appropriate" later this year "if the economy evolves broadly as expected".
His comments suggested the central bank might be more comfortable with lower rates over the course of this year as long as inflation continues to trend lower, analysts said.
"The budget certainly wasn't the reason Sterling hit its best level against the dollar for a month yesterday," Caxton FX strategist David Stritch said.
"That was more to do with Chair Powell's testimony on Capitol Hill, where the head of the world's most important central bank took an even-handed approach," he said.
Next week brings a raft of UK data, including gross domestic product and wage inflation - a key focus for the Bank of England.
Futures markets show traders believe UK rates will stay where they are until at least August, compared with June for the European Central Bank - which meets on Thursday - and for the Fed.