Investing.com - The pound was almost unchanged against the dollar on Wednesday, trading close to recent multi-year highs as optimism over Britain’s recovery fuelled expectations for a rate hike by the Bank of England in the early part of next year.
GBP/USD was trading at 1.6815, not far from the four-and-a-half year peaks of 1.6856 reached on Monday.
Cable was likely to find support at 1.6765 and resistance at 1.6856.
Sterling remained supported near recent highs after data on Tuesday showed U.K. economic growth continued to accelerate in the first three months of the year, albeit at a slightly slower pace than expected.
The U.K. economy grew 0.8% in the first quarter, bringing the annual rate of growth to 3.1%, the fastest rate of annual growth since the fourth quarter of 2007.
Market expectations had been for quarterly growth of 0.9% and an annual expansion of 3.2%.
A recent string of upbeat reports about the U.K. economy has raised expectations the BoE could raise borrowing costs ahead of other central banks.
Speaking on Tuesday, Bank of England Governor Mark Carney said the U.K. recovery is starting to “broaden”, but added that the bank still sees plenty of slack in the labor market.
Last week’s minutes of the BoE’s April meeting showed that the members of the Monetary Policy Committee were uncertain about the amount of slack remaining in the economy and also held differing views on the outlook for inflation over the medium term.
Elsewhere, sterling was slightly lower against the euro, with EUR/GBP rising 0.15% to 0.8219, up from lows of 0.8196.
The single currency found support after data on Wednesday showed that euro zone consumer prices ticked higher this month, somewhat easing concerns that the region is falling into deflation.
The annual rate of inflation in the euro zone rose to up to 0.7% in April, from a record low 0.5% last month. Market expectations had been for an increase to 0.8%. The European Central Bank targets an inflation rate of close to but just under 2%.
The uptick in inflation eased pressure on the ECB to take steps to tackle low inflation. Earlier this month the central bank warned that it could launch a "broad-based" asset purchase program if the medium-term inflation outlook deteriorated.