(Updates prices, details) * Trade-weighted pound highest since mid-Feb 2011 * Euro/sterling near 3-month low, barriers at 82 pence FREE GUIDES AND REPORTS FROM DIANOMIADVERTISEMENT Oil and Gas Report The Oil and Gas Explorer Set for Huge Gains Download FREE Report * Improving UK data supports sterling LONDON, April 11 (Reuters) - Sterling rose to its highest in 14 months against a trade-weighted basket of currencies on Wednesday, bolstered by improving UK data, while the pound held near a three-month high against the euro. Worries about the euro zone debt crisis took centre-stage as Spanish 10-year bond yields remained high, prompting investors to switch to the UK currency which is still considered relatively safe in comparison to the common currency. The pound was supported by data that showed British retail sales rose in March at their fastest pace so far this year. The British Retail Consortium said like-for-like retail sales rose by an annual 1.3 percent in value terms, easily beating expectations of a stagnant performance. That came a day after figures showed UK house prices declining at their slowest pace since June 2010 in March. All of this added to signs that the UK economy was slowly recovering and the Bank of England would not have to resort to more monetary easing. "We have had some better UK data today, yesterday and the past week, giving reason for sterling outperformance," said Jane Foley, senior currency strategist at Rabobank. "But the real trigger will be how the euro performs against the dollar and if Spanish concerns intensify and the euro tests the lower side of its recent range against the dollar, then euro/sterling could come under more pressure." On a trade-weighted basis, the pound rose as high as 82.3 , its strongest since mid-February 2011, Bank of England data showed, before easing to 82.2. If it rises to 82.4, the index would have risen to its highest level since August 2010. The euro was subdued at 82.50 pence,, not far from 82.30, its lowest level since early January, with strong support seen around the Jan. 9 low of 82.22 pence. Traders said a UK bank bought euros earlier in the session with a reported option barrier at 82 pence likely to check losses for now. Analysts are said sterling was also benefiting from safe haven-related flows from the Middle East and this was likely to help it against the euro. Against the dollar, sterling was up 0.2 percent at $1.5910 with near-term resistance at $1.5934, the 50 percent retracement of its fall from $1.6063 on April 2 to a low of $1.5805 on April 5. It has bounced off those pre-Easter lows, supported by recent data that has shown a marked improvement in UK services, construction and manufacturing sentiment, fuelling hopes the country could avoid a recession. That contrasted with euro zone PMI surveys which highlighted a contraction in activity. As a result, interest rate spreads between safe-haven 10-year UK gilts and German Bunds have narrowed slightly this week, giving sterling an additional boost. Part of the tightening has also been due to expectations that the Bank of England is unlikely to resort to more quantitative easing soon. QE involves printing money to stimulate growth and can crimp demand for a currency. But analysts said overall appetite for sterling could fade if global risk sentiment suffered in coming days with risk-averse investors likely to choose the safe-haven yen and the U.S. dollar. Stocks were higher on Wednesday, but riskier assets have suffered in recent sessions as Spain's funding problems returned to the fore, adding to jitters about the health of the global economy after Friday's disappointing U.S. jobs report. "Challenges to global risk appetite and increased asset market volatility will work against sterling, in our view," Morgan Stanley strategists said in a note. (Reporting by Anirban Nag; Editing by Stephen Nisbet)

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