British retail sales data released Thursday painted a mixed picture of the strength of consumer spending, with month-on-month and annual comparisons showing strong gains but a three-month moving average showing a troubling slowdown in one of the economy's crucial sectors.

February retail sales grew by 3.7% compared with the same month last year, the Office for National Statistics said, and rose by 1.4% from January. The better-than-expected readings helped lift the pound above the $1.25 mark against the U.S. dollar to a one-month high of 1.2507 by 10:10 GMT.

"A comeback for UK Retail Sales in February challenges the notion that UK consumers are delaying activity due to the overhang of Brexit uncertainty," Saxo Bank's head of FX strategy John Hardy said. "Sterling is pushing into interesting territory versus the euro in the 0.8600-50 area, which looks pivotal for the near-term outlook."

The pound was also finding support from hawkish comments from Bank of England Deputy Governor Ben Broadbent, who told an audience at London's Imperial College that rate hikes were "quite possible". 

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However, a three-month moving average used by the ONS showed the biggest decrease in seven years, with sales in the three months ending in February falling 1.4% compared to the same period a year ago, the biggest decline since March 2010.

"The underlying trend suggests that rising petrol prices in particular have had a negative effect on the overall quantity of goods bought over the last three months," ONS Senior Statistician Katie Davies said in a statement.

The FTSE 350 General Retailers Index was up 1.52% on the day, having lost 3.08% over the past three months.

Consumer spending is an important indicator of the health of the U.K. economy, which is heavily reliant on the retail sector, after the vote to leave the European Union.

Inflation in the U.K. is starting to put pressure on retailers as real wage growth gets squeezed. Inflation surged to 2.3% in February the highest in more than three years, the ONS said on Tuesday, up from 1.9% in January.