By Harry Robertson
LONDON (Reuters) - The pound rose slightly on Thursday as investors waited for U.S. economic data later in the day and looked ahead to the Bank of England's interest rate decision next week.
Sterling was last up 0.12% at $1.2813, taking its gains this year to 0.7%. The euro was down 0.2% against the pound at 85.38 pence.
The pound has been the only major currency to rise against the dollar in 2024 as investors have bet that the Bank of England will keep interest rates higher for longer than its peers.
Expectations for higher rates tend to boost a country's bond yields relative to other markets, making the securities look more attractive and supporting the domestic currency.
Britain's housing market picked up in February, according to data on Thursday, with a gauge of new buyer inquiries notching the joint-strongest reading since February 2022.
GDP figures on Wednesday showed that Britain's economy grew 0.2% in January from a month earlier, after the United Kingdom slipped into a recession in late 2023.
Investors will watch closely at 1230 GMT when data on U.S. producer inflation, retail sales and weekly jobless claims is due out.
The Bank of England is widely expected to keep rates on hold at 5.25% next Thursday. Market pricing shows traders think the BoE is most likely to cut borrowing costs in August, later than the European Central Bank and Federal Reserve, which are expected to go in June.
"The Bank of England appears to be in less of a rush than the ECB for sure and also the Fed," said Francesco Pesole, FX strategist at ING.
"Markets have kind of cemented their view that they will cut in August. Unless we see big deviations in the data I think they'll keep pricing that in."
Pesole said the release of the Bank of England's inflation attitudes survey tomorrow could shift rate cut expectations and sterling, as could the consumer inflation data due on Wednesday next week.