The British pound jumped back above the $1.36 level earlier in the trading session today before pulling back after the release of better than expected data bolstered the case for a rate hike in the nearest future from the Bank of England.

At 1.19pm (GMT) the British currency was trading at $1.3540, up from $1.3509 in yesterday’s trading session.

The latest retail sales figures from the UK hit the market earlier today at 1 percent against analysts’ expectations for a figure of 0.2 percent and shows consumer confidence is on the rise

Many now predict that the path has been cleared for a rate hike from the BOE although they are advised to proceed with caution,

“Sterling has found a reason to move on the back of the news, having been directionless over the week so far. With non-food price inflation hitting multi-year highs, there is certainly plenty of rationale for [Bank of England Governor] Mark Carney to begin a gradual hiking process, but the limited reaction from sterling show that the market is still rather cautious,” said IG chief market analyst Chris Beauchamp.

An interest rate decision due out later today from the US Federal Reserve is likely to be the main driver of the pound as we head into the American trading session.

No changes in rates are expected from the Fed but the following statement from the central bank will be closely monitored for signs of the bank’s future movements regarding rate moves and should the market be expecting any hikes later in the year.

With inflation still running well under the Fed’s target rate, the chances of a dovish speech from Fed President Janet Yellen remains high which will likely further boost the pound,

"With tepid inflation, the dot plot for the longer term is more vulnerable to downward revisions and this could potentially weigh down the dollar," said Zhu Huani, market economist at Mizuho Bank.