LONDON: Sterling edged down against the dollar and euro on Wednesday, refusing to be lifted by second-quarter UK growth data that was stronger than had been expected, though backward-looking.
Britain's economy grew by 0.6 percent during a second quarter that ended with a vote to leave the European Union, up from 0.4 percent in the first three months of 2016.
Those numbers incorporated just a week of the period after the June 23 vote, but retail sales numbers released later that covered sales between June 28 and July 14 showed their sharpest fall in four years, raising doubts about the ability of consumers to stave off a Brexit recession.
Sterling hit the day's low of $1.3072 after the retail numbers, though it had recovered to trade just slightly lower on the day at $1.3122 by 1445 GMT, leaving it more than 3 cents above a 31-year low hit earlier in the month, before it was clear when Britain would get a new prime minister.
Against the euro, sterling fell 0.3 percent to 83.86 pence .
"Expectations have heightened over the Bank of England cutting UK rates in 2016, which has obstructed most upside gains," said FXTM analyst Lukman Otunuga. "Sentiment remains bearish towards sterling and further declines could be expected if last week's worrying PMI data fuel fears of a potential contraction in third quarter GDP."
Sterling hit a two-week low on Tuesday after BoE policymaker Martin Weale said Friday's weak purchasing managers' index (PMI) surveys would be "very material" for the bank's next policy meeting. He had said last week that more evidence of economic weakness was needed before he would back an interest rate cut.
The BoE surprised markets in July by not cutting the benchmark borrowing cost from its record low of 0.5 percent. But minutes of the decision showed most policymakers expected to support an unspecified package of measures to boost the economy at the Bank's meeting next week.
A Reuters poll published on Tuesday found that while economists almost unanimously expect the BoE to cut rates next week, a slim majority reckon it will hold off on restarting its asset purchase programme for now.
The pound has tumbled almost 12 percent against the dollar since the June 23 referendum. Investors are worried that Brexit will have negative consequences for the economy and in particular an already huge current account deficit, which will widen further if investment flows dry up.
"They (the GDP numbers) do give us an idea of how the economy was set up going into the referendum so they're not completely insignificant," RBC Capital Markets currency strategist Adam Cole said. "But they really are in the shadow of the monthly numbers, which help us build up a picture of what the economy looks like post-referendum."
British finance minister Philip Hammond repeated on Wednesday that he and the BoE would take whatever action was needed to bolster the economy as it entered "a period of adjustment" after the Brexit vote.
A U.S. Federal Reserve policy meeting later in the day was also in focus for currency traders.
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