Sterling rose against the euro as positive reports on the state of the UK economy buoyed investors.

This morning the sterling stood at 1.4506 to the euro and at 1.8566 to the US dollar.

The dollar gained against the euro after the Federal Reserve chairman, Ben Bernanke, said that gains in inflation indicators are "unwelcome''.

Sterling was strengthened by a report from the British Retail Consortium that showed retail sales grew strongly in May, together with market news that the airport operator BAA will likely be taken over by Spanish construction firm Ferrovial in a £10.3 billion deal.

"News from the UK continues to improve and the BRC survey is indicative of a recovery in the consumer sector," Steve Barrow, currency strategist at Bear Stearns told Reuters.

"I think we are possibly getting to the end of this uptrend in euro/sterling."