LONDON Sterling rose on Tuesday after data showed British wages grew at a record pace in the second quarter, adding to the Bank of England's worries about inflation.

The pound was last 0.2% higher at $1.2707, after rising as much as 0.28% to $1.2720 right after the data.

It also strengthened slightly against the euro which was at 85.95 pence.

Wages excluding bonuses were 7.8% higher than a year earlier in the three months to June, representing the highest annual growth rate since comparable records began in 2001, the Office for National Statistics said.

Economists polled by Reuters had forecast a 7.4% rise.

The BoE has warned pay growth is too strong and it might need to raise interest rates further, after 14 back-to-back increases in borrowing costs.

(Reporting by Joice Alves, editing by Alun John)