Pound rises against dollar 

Sterling rose against the dollar on Wednesday as the U.S. currency came under broad selling pressure before a policy statement from the Federal Reserve later in the day. Skip related content

Traders also awaited testimony from Bank of England Governor Mervyn King to the UK Treasury Committee later in the day to see if he would refer to recent signs that the UK economic downturn may be levelling off.

Later in the day, the Fed is widely expected to quell recent speculation of a possible rise in interest rates this year, which analysts say may sting the dollar and benefit the pound.

"Sterling could come under upward pressure as we move into the FOMC, and also if we get confirmation from the BoE that the economy is stabilising, albeit at a weak level," said Stephen Koukoulas, strategist at TD Securities in London.

Traders shrugged off figures showing that retail sales in June fell at the same pace as the previous month. The CBI's distributive trades survey sales balance came in at -17, unchanged from May and in line with expectations.

Boosting the UK currency was corporate demand as well as market chatter that Middle Eastern names were buying the pound, traders said.

The pair traded comfortably above its major daily moving averages, which also kept upward sterling momentum intact.

The euro fell 0.7 percent to 84.89 pence.

James Hughes, market analyst at CMC Markets in London, said that sterling would likely take a stab at $1.6664 in the very near term, which could take the pair to $1.68. The next major resistance level above that lay around $1.77, he added.

Analysts said the UK currency has more room to rise as improving economic data and signs that quantitative easing is working warm sentiment on the pound.

King will begin his testimony at 2:30 p.m..

BoE chief economist Spencer Dale said on Tuesday it was too soon to judge the effectiveness of the central bank's programme to buy a target of 125 billion pounds in UK assets to help boost the economy, but that early signs were positive.

(Reporting by Naomi Tajitsu; editing by Stephen Nisbet)