LONDON: Sterling traded close to three-week high against the euro on Thursday despite data showing British retail sales fell in March, as several polls suggested Britain will vote to stay in the European Union.
Traders and analysts say politics will play a greater role for sterling than economics before the June 23 ballot. That appears to have been the case since late last year.
The pound has fallen around 10 percent since November on worries that Brexit would do huge damage to a country with a trade deficit of 12 billion pounds, its widest in eight years, and a current account deficit that reached 7 percent of GDP in the final quarter of 2015.
Data released on Thursday showed retail sales fell in March, another sign the British economy may be slowing. They came a day after data showed the number of unemployed in Britain rose for the first time since mid-2015 in the three months to February and wage growth slowed.
But sterling was steady at $1.4335 and 78.78 pence per euro , close to Wednesday's three-week high of 78.64 pence.
"The retail sales number was a big shock and come on the back of yesterday's weaker labour data," said Rabobank currency strategist Jane Foley. "But it's politics over economics before June."
An Ipsos MORI poll published in the Evening Standard newspaper on Wednesday gave the "In" camp 49 percent, 10 points ahead of "Out" voters. The previous Ipsos MORI survey from March showed "In" ahead by eight points. A TNS opinion poll followed the same pattern.
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Earlier in the week, Bank of England Governor Mark Carney told lawmakers that uncertainty around the referendum was weighing on the economy, adding that London could lose its position as the world's leading financial centre if Britain quits the EU.
Last week, BoE policymakers voted unanimously to keep interest rates at their record low of 0.5 percent.
"With core inflation and RPI running at 1.5 percent there is a risk the Bank of England might be behind the curve, distracted as it is by concerns surrounding the upcoming referendum vote," wrote CMC Markets analyst Michael Hewson in a research note.
Currency traders' main focus on Thursday is the European Central Bank, which is due to release its latest rate decision, followed by a news conference with ECB President Mario Draghi.
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