Sterling edged lower against a firm dollar on Thursday and gained slightly versus the euro in a quiet trading session due to a U.S. holiday.

The pound retreated 0.1% at $1.26625 but was still headed for its best week in 11 as the greenback slid this week. Trading volume was thin across markets as U.S. stocks and bonds markets were shut due to the Thanksgiving holiday.

Investors were also preparing to close the books on a volatile month that pushed up the dollar to over four-month highs and weighed on most major currencies.

The pound's losses this month, however, have been shallower than the euro's helped by bets on a more hawkish Bank of England policy stance and the looming U.S. tariff threat on the euro zone under incoming U.S. President Donald Trump.

"No news is seemingly good news for sterling at present," said Nick Rees, currency analyst at Monex Europe.

"We are biased to think that another day of sterling outperformance is likely, absent any surprises."

The relative changes in rate expectations has played in the British currency's favour lately.

The Bank of England move is expected to deliver 70 basis points (bps) of rate cuts by the end of 2025 compared to 145 bps by the European Central Bank and 75 bps by the Federal Reserve.

The pound was a fraction stronger on the euro with one euro at 83.26 pence. The common currency is set for its biggest monthly decline against the pound since January.

Against the yen, the biggest mover in currency markets on Thursday, the pound was up 0.4%, at 192.33 yen, its first rise in six sessions.

Markets were little changed after the latest survey data from the Confederation of British Industry (CBI) said business sentiment in Britain's services sector is falling at the fastest rate in two years, partly as a result of tax rises in finance minister Rachel Reeves' first budget on Oct. 30.

The gloom in the CBI survey has also been reflected in other surveys. Last week the S&P Global purchasing managers' index pointed to economic contraction for the first time in 13 months.

(Reporting by Medha Singh Editing by Alexandra Hudson)