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The U.K. pound extended gains to trade at the highest level against the U.S. dollar in seven months after a much stronger-than-expected reading of retail sales data in Europe's second-largest economy.

Britain's Office for National Statistics said April retail sales rose by 2.3% from the previous month, more than double the rate expected by economists, and said "anecdotal evidence from retailers suggests that good weather contributed to growth." The April boost also lifted the three-month average of the data set to show a 0.3% annual advance from the previous period.

The pound leaped to 1.3038 against the dollar following the release, a 0.54% gain on the session, taking the currency pairing, known as 'cable', to its highest level since Sept. 30 of last year.

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Last week, the Bank of England warned that slowing wage growth and higher consumer prices could impact sentiment and erode growth potential, but nonetheless noted that uncertainty related to the country's pending exit from the European Union had somewhat abated. 

"One underlying factor explaining stronger-than-expected demand growth may be that uncertainty has been less of a drag on activity than anticipated, particularly for consumer spending," the Bank of England. "Greater uncertainty can deter households from making some major purchases and reduce companies' appetite for investment. Some of the weakness in investment does appear to reflect a drag from uncertainty, but a smaller one than had been anticipated in August."

U.K. inflation accelerated to its highest level in four years last month, according to figures published by the ONS earlier this week, with April inflation speeding to 2.7% while core inflation, which strips out volatile prices for food and energy, accelerated to 2.4%, the highest since March 2013.