Sterling fell against the dollar on Thursday, staying close to a four-week high hit the previous day although analysts said worries about the fragility of the UK economy would limit scope for further gains.
These concerns were highlighted by Wednesday's data showing the number of unemployed at its highest since 1994, while the central bank's decision to implement more quantitative easing was expected to remain a negative factor for sterling.
The pound was down 0.25 percent at $1.5708 , with near-term resistance seen at the 100-week moving average at $1.5783 and the previous day's high around $1.5797, with talk of an options barrier at $1.58.
Comments by BoE policymaker Charlie Bean, who said in a newspaper interview on Thursday that the BoE could expand its QE programme if it deemed it necessary, helped weigh on the UK currency.
Sterling has recovered strongly from a 14-month low of $1.5270 last week after the Bank of England announced it would restart its asset purchase programme, fuelled by a squeeze of hefty short positions in the currency.
It has also benefited in tandem with gains in the euro against the dollar as markets have tentatively become more optimistic about European leaders' determination to tackle the euro zone's debt crisis.
"Generally the pound is trading in line with risk assets, so that when there's an improvement in sentiment it tends to outperform," said Lee Hardman, currency economist at BTMU.
He said the pound could see more gains against the dollar as investors continue to cut previous short positions, but said it would stay capped below $1.60 and would move back lower again once these positions had been adjusted.
Sterling also weakened against the euro, which was up 0.1 percent at 87.64 pence , not far from its late September high around 87.95 pence and just shy of the 100-day moving average and Wednesday's high around 87.86 pence.
UK trade data at 0830 GMT was not expected to have much of an impact on sterling, though it could add to evidence of a fragile economy and further dampen hopes for an export-led recovery in the UK.
Britain's goods trade deficit is expected to narrow slightly to 8.8 billion pounds in August, although this would still be above the average 8 billion-pound gap seen between January and July.
"$1.58 remains a significant short term technical barrier (for sterling/dollar), suggesting euro/sterling is biased higher from here in the absence of a much better than expected trade number this morning," Lloyds analysts said in a note.
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