By Joice Alves
LONDON (Reuters) - Sterling rose on Friday against a weakening euro and dollar after signs that the European Central Bank (ECB) and the U.S. Federal Reserve might be closer to cutting interest rates than the Bank of England (BoE).
The pound rose 0.18% to $1.2826, after hitting its highest since August against a weakening dollar. It was set for its sharpest weekly jump against the greenback since November, up 1.4% this week.
Against the euro, sterling rose 0.35% to 85.17 pence, after jumping to a more than three week high. It was on track for its biggest weekly rise against the single currency since early January, up 0.5%.
Analysts said sterling's firmness this week was less a product of the UK fiscal outlook and more related to pressure on the dollar and euro after Fed Chair Jerome Powell sounded more confident about cutting interest rates in coming months, while the ECB's governing council had begun to discuss a suitable timeline for monetary policy easing.
"We think the BoE is likely to wait somewhat longer than the Fed and the ECB to start easing policy," said Karsten Junius, chief economist at J. Safra Sarasin Sustainable Asset Management.
"The main reason for this delayed reaction is that so far, the fall of services inflation and wage growth has been very limited, suggesting that underlying inflation might be stickier than elsewhere," Junius said.
Money markets are pricing in a BoE interest cut only in August, according the LSE Group data. Markets see a first Fed cut in June, according to CME Group (NASDAQ:CME).
Next week brings a raft of UK data, including gross domestic product and wage inflation - a key focus for the BoE.
On Wednesday, UK finance minister Jeremy Hunt's spring budget offered a raft of tax cuts, but little in the way of surprises for the market.
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.