Sterling increased on Friday as data revealed UK retail sales volumes edged up at their fastest rate in almost two years, as a boost to consumer confidence helped counter inflationary pressures.

Sales increased 0.8% between February and April compared to the previous three months, the largest rise since the three months to August 2021, as per data from the Office for National Statistics.

When writing, the Pound gained 0.3% against the Dollar at $1.2355.

This month Sterling has fallen by 1.9%, on track for its first monthly decline since February, Reuters reports, predominantly as a result of a rise in investor demand for the greenback. The Sterling edged down 0.1% to 86.95 pence against the Euro.

UK inflation dropped less than forecast to 8.4% last month, according to data out this week, whilst core price pressures reached a 31-year top.

In the US, the Dollar eased on Friday but was still on course for a third consecutive weekly gain, as markets hiked bets on higher-for-longer interest rates to curtail inflation and awaited US debt ceiling negotiations to reach a resolution.

Concerns were eased somewhat as progress was seemingly made on Thursday in talks between President Joe Biden and top congressional Republican Kevin McCarthy, but jitters remained over a default risk.

“Monday is a bank holiday in the US, so market participants will have to wait until Tuesday 30th May to trade positions again, so there is a strong belief that Washington needs to make a deal happen today,” according to a note by MUFG currency analysts.

The Dollar index – measuring the currency against six peers – was down 0.2% on Friday at 104.06, falling short of Thursday’s two-month high of 104.31. However, the index was on course for a weekly gain of 0.8%.