- The pound was firmer after a set of solid UK retail sales and mortgage lending data this morning slashed the chances of an interest rate cut as early as next month. The latest retail sales numbers -- which showed the biggest annual increase since November 2004 -- are likely to ease concerns among UK rate-setters about a slowdown in the retail sector, while signs of a pick-up in the housing market are also encouraging, analysts said. "In the past, the Bank of England has said that it often takes until Easter to get a good picture of how consumption has fared over the holiday season, but at February's MPC meeting, the committee will likely be more relaxed about the downside risks to growth posed by the retail sector," said CALYON currency analyst Daragh Maher. "As such, it will put mild upward pressure on sterling and (gilt) yields," he said. Elsewhere, however, the dollar was little changed against other major currencies as the market awaited the latest University of Michigan consumer confidence data and a speech by European Central Bank president Jean-Claude Trichet later this afternoon. In data out yesterday, the Philly Fed index, which measures manufacturing in the Philadelphia region, unexpectedly fell to 3.3 in January from 10.9 in December, the lowest reading since June. Against this backdrop, any softness in today's University of Michigan consumer sentiment index can be expected to weigh on the dollar further. Market expectations point to a reading of 92.5 in January, up from 91.5 in December. UBS analyst Mansoor Mohi-uddin also noted that a continued rebound in oil prices could also hurt the dollar if it leads to an increase in risk aversion. "If this starts to affect risk aversion at a time when the Fed appears to be close to the end of its (rate hiking) cycle... then the dollar will start to suffer," he said.