Sterling rose against the Dollar and Euro on Thursday as investors focused on the Bank of England's (BoE) monetary trajectory after policymakers' recent mixed signals.

The Pound declined towards the end of last week and on Monday against the Dollar after BoE governor Andrew Bailey said inflation was decreasing in line with Bank of England predictions, indicating interest rates could potentially decrease faster than currently anticipated by the market.

Sterling rose against the greenback on Tuesday as weaker monthly US business activity hampered the Dollar, Reuters reports.

"With Sterling undershooting the move in UK rates and more balanced commentary this week, our bias would be to fade the recent dovishness and for the Pound to retrace some of its losses," stated Kamal Sharma, forex strategist at BofA. 

Earlier this week, the Bank of England's Chief Economist Huw Pill said rate cuts are still some distance away, despite no negative news on inflation bringing them closer.

Yet some analysts contended that recent UK economic data would indicate a later start rather than an earlier one for the BoE monetary easing cycle.

"However, with June now pricing in a greater chance for cuts, we doubt that the Pound will immediately recapture its recent highs ahead of the May BoE rate meeting," BofA's Sharma went on to say. 

Sterling rose 0.4% to $1.2519, after increasing 0.8% on Tuesday, the highest rise in a day since mid-December. Whereas it fell around 1.5% from Thursday to Monday, the Reuters report adds.

The Pound's drop against the Euro was due to dovish remarks from BoE officials, which were exacerbated by strong economic data in the euro area. 

This included eurozone business activity expanding at its fastest pace in nearly a year in April, and Germany's private sector unexpectedly returning to growth.

Sterling regained some of its losses in the last two sessions, with the Euro trading at 85.64 pence per Pound after reaching 86.44 on Monday, its highest level since early January.