LONDON Sterling rose briefly on Thursday after data showed British retail sales fell at a much slower pace than expected in August, although expectations that the Bank of England is likely to look through the data and keep policy accommodative checked gains.
Retail sales volumes edged down 0.2 percent on the month in August after jumping an upwardly revised 1.9 percent in July, the strongest July performance in 14 years, the Office for National Statistics said. August's fall was smaller than the 0.4 percent drop forecast by economists in a Reuters poll.
Sterling rose to $1.3243 after the data, up from $1.3214 beforehand and turned a tad higher on the day. The euro fell to 84.90 pence, down 0.1 percent on the day and compared with 85.01 pence before the data was released.
Investors focused on the BoE announcement due at 1100 GMT. Analysts expect the Bank's monetary policy committee (MPC) to reiterate that Brexit uncertainty will drag on the economy as Britain and the EU thrash out a new relationship over the next couple of years. The BoE cut interest rates last month to record lows and reintroduced an asset-purchase programme.
Under the MPC's new calendar, the Bank's next rate decision is scheduled for Nov. 3. That is when economists expect it to cut borrowing costs to around 0.1 percent.
(Reporting by Anirban Nag, editing by Nigel Stephenson)