Investing.com - The pound trader higher against the dollar on Thursday though the pair trimmed gains after a key Federal Reserve official described a sluggish first-quarter as a one-off event and predicted inflation rates to hit comfort zones in a matter of months.
In U.S. trading on Thursday, GBP/USD was trading up 0.20% at 1.7015, up from a session low of 1.6971 and off a high of 1.7040.
Cable was likely to find support at 1.6952, Wednesday's low, and resistance at 1.7063, the high from June 19.
St. Louis Federal Reserve President James Bullard told Fox Business Network earlier that an improving economy may make conditions ripe for interest rates to rise possibly in early 2015.
The Commerce Department reported Wednesday that U.S. gross domestic product contracted at an annual rate of 2.9% in the first quarter of the year, far surpassing consensus forecasts for a decline of 1.7%, though markets quickly brushed off the dismal numbers as a weather-related disappointment.
"I think the market's right to shake this off," Bullard told the network, describing the contraction as an "aberration."
"If you throw out the first quarter and just look forward over the next four quarters, most forecasters have 3%-plus growth."
Inflation, while still low, is on the rise and approaching the Fed's 2% target.
"My forecast actually has us moving through 2% and over 2% in 2015," which bolstered the dollar despite lackluster U.S. data.
The U.S. Department of Labor said the number of individuals filing for initial jobless benefits in the week ending June 21 declined by 2,000 to 312,000 from the previous week’s revised total of 314,000.
Analysts had expected jobless claims to fall by 4,000 to 310,000 last week.
A separate report showed that U.S. personal spending rose 0.2% last month, below expectations for an increase of 0.4%. Personal spending for April was revised to a flat reading from a previously reported decline of 0.1%.
Bullard's comments boosted the dollar, with the greenback taking back earlier losses stemming from the weak GDP report.
Meanwhile in the U.K., the Bank of England said that from October it will cap mortgages, so that people borrowing 85% of a house's value will not be allowed to borrow more than 4.5 times their income.
The bank also announced a new affordability test on banks, whereby borrowers will now have to show that they can repay the mortgage even if interest rates rise 3%, up from 1% previously.
BoE Governor Mark Carney said the recovery in the U.K. economy is broadening and strengthening, but the housing market is the main risk to financial stability.
The bank acknowledged that the immediate impact of the cap would be minimal as most lenders already lend within the 4.5 income limit, but Carney said the measures will have "an impact of the durability of the expansion."
Demand for sterling continued to be underpinned as the new measures did little to alter expectations that the BoE will raise interest rates ahead of other central banks.
Elsewhere, sterling was up against the euro, with EUR/GBP down 0.31% at 0.8001, and down slightly against the yen, with GBP/JPY down 0.01% at 172.99.
On Friday, the U.K. is to produce data on the current account and final data on first quarter growth.
The U.S. is to round up the week with revised data on consumer sentiment.