Sterling hit a one-month high against the dollar today, outperforming other major currencies after stronger than expected UK retail sales data soothed worries about weakening consumer sentiment. 

UK retail sales rose by 1.4% in February from January, the official numbers showed, beating a 0.4% increase forecast from a Reuters poll of economists.

The increase also ended a streak of three consecutive monthly declines.

But retail sales for the three months to February still saw the biggest slide for retail sales in nearly seven years.

Higher fuel prices eroded shoppers' disposable income and the Office for National Statistics said the monthly improvement was too little to offset the drag from previously weak demand. 

But added to comments by Bank of England deputy governor Ben Broadbent, today's numbers bolstered speculation that the bank might be able to raise sterling interest rates at least once in the next year, driving the pound half a cent higher. 

It peaked at $1.2532, its highest since February 24, before retreating slightly to stay largely unchanged at $1.2526, up 0.3% on the day. 

It was also 0.5% stronger at 86.08 pence per euro. 

Sterling has lost nearly a fifth of its value since the Brexit referendum in June, contributing to a spike in domestic inflation which has further weighed on previously robust consumer spending which then propped up the UK economy. 

A stream of recent data had suggested British consumer sentiment waning, as rising prices force Britons to spend less on non-essential items. 

That speaks for continued easy monetary policy. But signs that the Bank of England will step in to support the pound with both hawkish talk and potentially a rise in official borrowing costs have instead dominated the past week's trade in sterling. 

A number of major banks have warned in the past month that sterling could fall below $1.20 as public jousting with Brussels on the terms of Britain's departure from the EU gets going after the launch of talks next month.