The pound rises on strong UK data, low CPI brushed off

LONDON (Reuters) - The pound rose broadly on Tuesday after strong retail sales and house price data suggested the economy may be bottoming out, while weak German sentiment figures prodded the pound to the day's high against the euro.

Despite the solid readings, gains in the currency were capped as other data showed consumer prices have fallen below the Bank's 2.0 percent target, suggesting low inflation risks may prompt the central bank to continue quantitative easing.

Early on Tuesday, thee British Retail Consortium said like-for-like retail sales rose 1.4 percent in June on the year while the Royal Institution of Chartered Surveyors said its house price balance posted its best reading since September 2007.

"Sterling has kept its gains from the strong data released overnight," said Naeem Wahid, currency strategist at Bank of Scotland Treasury Services in London.

"The UK CPI came out exactly in line on almost every measure you can think of, and so it had little impact on the market."

Still, he said the inflation figures, which showed annual CPI fell to 1.8 percent, the lowest since September 2007, bolstered the argument the Bank was in no hurry to end its quantitative easing programme.

The figures from the Office of National Statistics had limited downward impact on sterling, however, as they were in line with market expectations. Data also showed retail price inflation fell at an annual 1.6 percent its sharpest drop since records began in 1948.

By 1018 GMT (11:18 a.m. British time), the pound was at $1.6320, 0.6 percent higher from late Monday and near the day's high of $1.5327.

The pound has recovered from a fall to a one-month low of $1.5983 late last week, but technical resistance was seen limiting further significant gains in the currency.