By Sara Sjolin, MarketWatch

The pound rose back above $1.25 to trade around a one-month high on Thursday after a surprisingly strong reading on U.K. retail sales fueled hopes of a more hawkish tone at the Bank of England.

Sterling jumped to an intraday high of $1.2528, up from $1.2484 late Wednesday in New York. The move came after the Office for National Statistics said retail sales rose 1.4% in February on the month (http://www.marketwatch.com/story/uk-retail-sales-surge-14-in-february-2017-03-23), easily beating forecasts of a 0.4% rise.

"Retail sales data was very strong this morning and sterling has rallied once again. It comes hot off the back of the headline inflation earlier in the week, with the hawkish MPC statement and rate vote results still resonating," said Alex Edwards, currency analyst at OFX, in a note.

"It's likely to make for an even more aggressive BOE statement next month, with sterling up through $1.25 as a result. This recent combination of market data will likely support GBP through to the end of the week and perhaps into next. $1.26 could well be in sight," he added.

The pound started to rise last week after BOE member Kristin Forbes took markets by surprise and voted for a rate hike at the bank's policy-setting meeting. The hawkish view was further supported by consumer price figures out this week, showing U.K. inflation shot above the central bank's 2% target in February.

In other currencies on Thursday, the dollar traded in tight ranges as investors waited for a speech by Federal Reserve Chairwoman Janet Yellen and an important vote on the Republican's health-care bill. The ICE Dollar Index was marginally higher at 99.74.

The euro fell to $1.0791 from $1.0798 late Wednesday.

(END) Dow Jones Newswires

March 23, 2017 07:54 ET (11:54 GMT)