LONDON: Sterling hit a three-month high against the dollar on Thursday, tracking gains in other perceived riskier currencies after the US Federal Reserve indicated it could opt for more monetary stimulus "fairly soon". Analysts said the pound was likely to remained well bid given persistent speculation the European Central Bank will take action to tackle the euro zone debt crisis, that also fuelled investor appetite to take on risk. Sterling rose 0.2 percent against the dollar to $1.5912, its highest level since mid-May. It was last close to flat on the day at $1.5881. The pound extended gains from late on Wednesday when the minutes from the Fed's last meeting raised expectations policymakers could deliver another cash injection to stimulate economic growth as soon as September. "The FOMC has helped higher-beta currencies across the board. The market also feels a bit more positive about the euro zone so I think cable (sterling/dollar) can hold these levels," said Geoffrey Yu, currency strategist at UBS. "We wouldn't want to bet on fading these moves right now, although if sterling goes above $1.60 we would reassess." Technical strategists said resistance around $1.5910, the 61.8 retracement of the late April to early June fall from above $1.63 to around $1.5270 may cap sterling gains. But a clear break of that level opened the door to a test of $1.60. The Fed's bias towards more accommodative monetary policy, which tends to weigh on the dollar, wrong-footed many market players who had focused on recent signs of improvement in US economic data. In contrast, the Bank of England is still expected to keep monetary policy largely unchanged at their next meeting. BoE policymaker Martin Weale told a French newspaper he did not think it was necessary to extend asset purchases at this stage. DATA IN FOCUS A French PMI survey showing manufacturing and services activity was not as bad as forecast briefly boosted sterling and the euro against the dollar, although the sectors were still in contraction and the euro zone as a whole looked destined for recession. The euro rose 0.2 percent against sterling to 78.98 pence, close to Wednesday's two-week high of 79.10 pence. The single currency has been supported in recent days by expectations the ECB will intervene in the bond market next month, buying Spanish and Italian debt to ease their borrowing costs. In the near-term, analysts said the next focus for sterling investors would be the second reading of UK second quarter GDP on Friday. While the data is likely to show economic activity has shrunk, many analysts expect it to be revised up from the initial estimate of a 0.7 percent contraction. "Euro/sterling will likely remain rangebound today but could see some downside bias with sterling likely to be well supported ahead of tomorrow's second estimate for Q2 GDP which is expected to be upwardly revised," Lloyds analysts said in a note. The UK CBI distributive trade survey, due at 1000 GMT, could also lend some support to sterling if it exceeds expectations of a rise to +15 from July's reading of +11.

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