The pound strengthened versus the euro and dollar on Friday as robust UK retail data the previous session eased expectations about the extent of monetary easing likely from the Bank of England.

A 0.8 percent jump in January retail sales bucked the trend of a series of soft economic data in the last few months and saw investors sharply pare back forecasts for a series of rate cuts in the first half of the year.

"The UK economy is a little stronger than people had thought and people are moving away from the extremely bearish views, so we would expect euro/sterling to head lower," said Geoff Kendrick, currency strategist at Westpac.

At 0834 GMT, the euro was 0.25 percent lower at 75.28 pence. The pound was up 0.2 percent at $1.9676, around one-week highs.

However, some analysts continue to hold a bearish stance on the pound, pointing to a slowing economy and a banking sector beset by problems.

The pound took a knock earlier in the week when the government announced stricken mortgage lender Northern Rock (NRK.L: Quote, Profile, Research) is to be nationalised and suffered a further blow when Alliance & Leicester (ALLL.L: Quote, Profile, Research) wrote down 185 million pounds on exposure to risky assets.

"There has been a confluence of bad stories in the banking sector and given how important it is to the UK economy ... I see potential for the euro to rise to 80 pence," said Simon Derrick, head of currency research at Bank of New York Mellon."

Sourced by Reuters.