LONDON, May 26 Reuters The pound rose on Friday after data showed UK retail sales volumes rose at their fastest pace in nearly two years, as renewed consumer confidence helped offset the sting of high inflation and rates.

Between February and April, sales rose 0.8 from the previous three months, the biggest such increase since the three months to August 2021, according to data from the Office for National Statistics.

Sterling was last up 0.3 against the dollar at 1.2355.

The pound has fallen by 1.9 in May, heading for its first monthly decline since February, largely due to a recent swell in investor demand for the U.S. dollar39;s safehaven properties. Against the euro , sterling eased 0.1 to 86.95 pence.

Data this week showed UK inflation fell to 8.4 in April, less than expected, while core price pressures hit 31year highs, giving BoE policymakers no room for letup in their quest to tackle price pressures.

This week, UK government borrowing rates have shot to their highest since the bondmarket meltdown last September after thenPrime Minister Liz Truss39; damaging budget plans.

Interest rates in Britain have already risen to their highest in 16 years, at 4.50, and are now expected to end this year at 5.50, marking a stark turnaround from just one week ago, when money markets showed traders expected a peak of 4.80 by November.

Benchmark 10year gilt yields are now around 4.378, having risen nearly 70 basis points in May alone.

Gilts are trading at their largest…