Sterling rebounded against the US dollar this morning after the Office for National Statistics reported a stronger-than-expected 2.1% rise in UK retail sales in February.

This confounded analysts who were expecting a rise of 0.8% and contrasts sharply with the prior month's figure, when retail sales slumped 3% on the back of dismal weather conditions. After stripping out fuel, retail sales climbed 1.6% in February, the most since June. 'The data supports the view that the UK's recovery is well under way and that gives a positive tilt for sterling,' said Niels Christensen of Nordea Bank AB. 'The market is still divided, with some people looking for a sharp fall because of the budget situation and the public debt. I'm more toward the confident camp going forward.'  Sterling benefitted from heightened levels of risk appetite, partially due to news out of Europe and Dubai. Germany's Chancellor Angela Merkel today backed a Greek rescue proposal, saying she will recommend a combination of International Monetary Fund help and bilateral EU aid. Meanwhile, Dubai shares rallied after the emirate said it would commit to $9.5 billion to help Dubai World restructure its debt.