LONDON: Sterling recovered from a day's low against the dollar and cut losses against the euro on Wednesday, after data showed the British economy grew in line with expectations in the first quarter.
Gross domestic product (GDP) grew by 0.4 percent in the first three months of the year, in line with forecasts but slower than the 0.6 percent in the previous quarter. For the year, the economy grew by 2.1 percent, slightly stronger than economists' predictions.
The Office for National Statistics (ONS) said it had no evidence for or against the slowdown being linked to uncertainty around Britain's June 23 referendum on European Union membership.
Sterling rose to $1.4590 after the data release, from a low of $1.4547 struck just beforehand. The currency had hit a 12-week high of $1.4640 on Tuesday but came under pressure in the minutes before the GDP report was released.
The euro slipped to 77.57 pence, compared with 77.77 before the data was released.
"The ONS went out of its way to say Brexit concerns haven't affected first-quarter growth, but markets will probably write the report off as old news," said Ned Rumpeltin, European head of FX strategy at TD Securities.
"The uncertainty from Brexit will start to show up in the second quarter with consumption and investment likely to slow. For now, sterling is still seeing some referendum-related relief, but for us it remains a close call. There are still eight weeks before the vote and we cannot be complacent about the outcome."
Investors worry that a vote for Britain to leave the European Union in June would leave the country exposed to a slide in the pound, raise the cost of financing its huge public debt and undermine a shaky economic recovery.
Brexit would also hit workers in their pockets, costing the average working Briton the equivalent of a month's salary by 2020, the Organisation for Economic Co-operation and Development said on Wednesday.
Only last week, US President Barack Obama warned Britain would move to "the back of the queue" in trade talks with Washington if it left the bloc. His comments struck a chord with voters with odds for Britain staying in the European Union improving significantly since late last week.
But traders remain wary of the pound's recent rally and expect sharp swings in the weeks leading to the June 23 vote.
"There is plenty of scope for these gains to be reversed as we head to the vote, should opinion polls show the "Leave" camp gaining ground, spooking investors. It could be a volatile couple of months for the pound," said Jake Trask, currency analyst at UKForex.
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