LONDON: Sterling steadied on Tuesday after hitting a two-week low against the dollar on opinion polls showing the outcome of June's referendum on European Union membership was on a knife edge.
Short-term market interest rates now price in a substantial chance of a Bank of England cut by the end of the year, a reflection of concerns over what Brexit - or the turbulence caused by the vote alone - will do to economic growth.
Monthly trade data later on Tuesday will provide another indicator of how vulnerable Britain's economy is after numbers in late March showed the current account deficit reached a record high at the end of last year.
One poll on Monday showed the "In" campaign with a 2 percentage point lead ahead of the June 23 vote, while another showed the same margin in favour of leaving.
"Sterling is still on the back foot," said Tobias Davis, head of corporate treasury sales at Western Union in London. "The Brexit debate is still front and centre of people's minds."
Sterling was just 0.1 percent higher at $1.4412 having fallen as low as $1.4375 on Monday. It was flat at 78.93 pence to the euro.
Sterling retreated from four-month highs last week after weak surveys of manufacturing, construction and services highlighted the economic risks posed by the vote. They indicated the economy was on track for quarterly growth of 0.1-0.2 percent, down from 0.4 percent in the first quarter.
The BoE's monetary policy committee meets this week and the Bank, which has warned about the economic risks of Brexit, will release updated growth and inflation forecasts in a quarterly report on Thursday. Governor Mark Carney will address a news conference the same day.
The world's biggest staffing agency Adecco said on Tuesday that speculation that Britain might vote to leave the 28-country bloc was hitting demand for highly skilled finance jobs.
Surveys also suggested British shoppers held off from buying new spring and summer clothes during an unusually cold April, compounding a sense of uncertainty among consumers ahead of the vote.
Many economists believe leaving the EU would deal a blow to the British economy, with the current account gap of 7 percent of GDP leaving it vulnerable to any pull-back in investment flows.
"The pound will remain sensitive to both political comment and new polls regarding the EU referendum, with position shuffling expected ahead of the quarterly Inflation Report," analysts from South African bank Investec said in a morning note.
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