Sterling rallied on Friday as data revealed consumer spending in the UK was stronger than forecast last month, despite elevated inflation, as wage growth rallied, bolstering the case for further rate hikes by the Bank of England this year.

Retail sales increased by 0.7% in June compared to the month before, surpassing forecasts for a rise of 0.2%, whilst year-on-year sales declined 1.0%, compared to predictions for a 1.5% fall, as per official data.

The Pound increased by as much as 0.28% to reach a session high of $1.2904 following the figures, Reuters news agency reports. At the time of writing, Sterling rose by 0.2%.

However, the Pound remained on track for its biggest weekly loss against the Dollar since January, as additional data this week revealed UK inflation cooled much quicker than forecast in June. This led traders to reduce their forecasts for UK rates to increase to as much as 6%.

Elsewhere, the Euro edged up 0.1% to $1.1141 after falling 0.6% on Thursday. The European Central Bank is forecast to hike interest rates by 25 basis points next week, according to economists polled by Reuters, the majority of whom also forecast an additional hike in September.

Furthermore, the Dollar remained steady on Friday as data indicated a resilient US labour market that may result in the Federal Reserve maintaining interest rates higher for longer.

The Dollar index – measuring the greenback against a basket of rivals – stood at 100.75, maintaining its overnight gain of 0.5%. The index is on track for a 1% rise in the week.

In China, the onshore Yuan was stronger against the Dollar on Friday and, at the time of writing, was trading at 7.1693 per Dollar as the central bank set far stronger guidance than predicted.

Whilst in Australia, the Dollar was flat on Friday at $0.678, and the New Zealand Dollar edged down 0.18% to $0.622.