LONDON (Reuters) -Sterling fell versus the dollar on Thursday after data showed U.S. retail sales unexpectedly increased in August, while Asian stock losses spooking sentiment also weighed on sterling. A surge in online and furniture store purchases in the United States offset a continued decline at auto dealerships, which could temper expectations for a sharp slowdown in economic growth in the third quarter. Versus the dollar, sterling fell 0.5% to a one-week low of $1.3770 at 1500 GMT, off the 5-week high of $1.3913 touched earlier this week. “The dollar is bid across the board with the U.S. data beat sending yields higher supporting the dollar,” said Jeremy Stretch, head of G10 FX Strategy at CIBC Capital Markets. He added that the weak performance across Asian bourses is also impacting “risk-sensitive crosses including cable.” Versus the euro, sterling edged 0.1% higher at 85.42 pence, after jumping to one-month high of 85.01 earlier in the day. Sterling has gained momentum this week as traders assessed the Bank of England’s next move after data showed British inflation rose in August by 3.2% in annual terms, the biggest monthly jump in the annual rate in at least 24 years, fuelling expectation of a rate increase. The BoE expects inflation to hit a peak of 4% this year. The strong reading for inflation could reinforce expectations that the central bank is set to tighten monetary policy quicker than the European Central Bank or the U.S. Federal Reserve. “Should UK growth/inflation data come in on the strong side, the market’s search for the BoE terminal rate could keep GBP supported,” said Chris Turner, global head of markets at ING in a note to clients. A poll from Reuters found that investors believed the BoE would raise borrowing costs by the end of 2022. The latest inflation numbers brought forward these expectations to mid-2022.