Pound surges vs dollar supported by expectations for U.K. rate liftoff; FTSE 100 higher

On Friday the pound edged up to nearly two-and-a-half week highs versus the greenback, as mounting expectations for a U.K. rate hike continued to support demand for sterling. 

Elsewhere in Europe, market sentiment improved after positive news on the Greek developments.

European stocks in general and British ones in particular have moved sharply higher in recent days on relief Greece has secured a bailout deal, staving off for now an exit from the eurozone.

GBP/USD hit 1.5671 during European morning trade, the pair's highest since Wednesday; the pair subsequently consolidated at 1.5644, adding 0.21%.

On Thursday euro zone ministers agreed to give Greece a €7 billion bridging loan from a European Union-wide fund to keep its finances afloat until a bailout is finalized. All EU members are expected to confirm the loan Friday.

“The key point on the agenda today is likely to be the German vote on supporting the Greek bailout — the debate is expected to be heated, but consensus is that Berlin will ultimately be supportive. Any surprises here could knock sentiment, but this seems unlikely,” said Tony Cross, market analyst at Trustnet Direct, in a premarket note.

Earlier, the European Central Bank increased its emergency lending to Greek banks by €900 million and noted that it is operating under the assumption that Greece will remain in the euro zone.

Sterling was also boosted by remarks from Bank of England Governor Mark Carney who said on Tuesday that the time for a rate hike is approaching, noting that rate hikes will be gradual.

In testimony to the Treasury Committee in Westminster, Carney said that "the point at which interest rates may begin to rise is moving closer with the performance of the economy, consistent growth above trend, a firming in domestic costs, counter balanced somewhat by disinflation imported from abroad."

Elsewhere, the U.K.’s FTSE 100 index has dipped in early trade on Friday, but is heading for its best weekly performance in three months.

The London benchmark index dropped 0.2% to 6,783.06, setting it on track for a 1.7% gain on the week, the strongest since the week ended April 10.