LONDON: Sterling dipped back below $1.41 after a batch of British data on Friday, trimming earlier gains against both the dollar and the euro on the back of a surprise fall in industrial output and a bigger than expected trade deficit.
Industrial output declined 0.3 percent month-on-month in February to give a 0.5 percent fall on the year, its biggest drop since August 2013. Economists had expected it to edge up by 0.1 percent on the month and hold steady on the year.
The country's trade deficit in February was at 12 billion pounds, well above a 10.2 billion consensus forecast. January's reading was also revised up to 12.2 billion pounds.
Sterling slipped to $1.4085 from $1.4130 before the data was released, still up 0.2 percent on the day. The euro inched up to 80.84 pence, having traded at 80.56 beforehand.
The pound had fallen to its lowest since June 2014 against the euro on Thursday, on persistent concern that Britain will vote to leave the European Union in a referendum on June 23.
Opinion polls are showing a neck-to-neck battle between the "In" and "Out" camps but bookmakers are still giving it a one-in-three chance that Britain will exit the Union.
"A 12 billion pound trade gap comes at a pretty horrible time given all the Brexit worries.
It is a timely reminder of how vulnerable Britain is, especially since it runs one of the largest current account deficits," said John Hardy, currency strategist at Saxo Bank.
Investors got a reminder last week of just how exposed Britain might be if foreign investors are deterred by the prospect of Brexit: Britain's current account deficit grew to 7 percent of gross domestic product in the final quarter of last year.
A higher current account deficit usually puts downward pressure on the currency given outflows lag capital inflows.
Traders are also keeping an eye on any political uncertainty from the "Panama Papers" leak. British Prime Minister David Cameron said in a TV interview on Thursday that he once had a stake in his late father's offshore trust.
"If domestic news flow is dominated by Cameron's exposure, then we could see sterling come under more pressure," said a spot trader.
Meanwhile, the pound rose nearly 1 percent against the safe-haven yen to trade at 153.45 yen, recovering from a 2 1/2-year low of 151.70 yen struck on Thursday.
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