LONDON: Sterling hovered near a three-week high against the dollar on Friday, supported by solid growth and business investment data that helped offset worries over the impact of Britain's shock vote to leave the European Union.
The pound was on track for its best weekly performance in six weeks against the single currency, having hit a two-week high on Wednesday.
Short bets against sterling hit a record high in the week to Aug. 16, and traders said many speculators had been unwinding those positions and booking profits, which helped lift the currency.
Data released on Friday showed gross domestic product rose by 0.6 percent in the second quarter and was up by 2.2 percent compared with the same period last year, in line with preliminary readings and forecasts. Business investment unexpectedly rose between April and June - a period which mostly covered the run-up to the vote on June 23 - compared with the previous three months.
The pound was trading firm at $1.3215, not far from its three-week high of $1.3263 struck on Thursday, and on course for 1.1 percent weekly gain. Against the euro, sterling was up 0.1 percent at 85.50 pence per euro.
"UK data continues to stifle the scaremongers," said Alex Lydall, senior sales trader at Foenix Partners, a firm which offers hedging solutions to British companies.
"While this data-set is clearly not post-Brexit itself, solid figures running into the referendum and also strong business investment figures suggests the whole debacle perhaps wasn't as bad as previously thought around the month of June."
Sterling rose 1.2 percent against the dollar last week after July inflation and retail sales numbers beat forecasts, adding to signs that consumers have yet to rein in spending after the Brexit vote.
The recent slew of upbeat data helped sterling stay clear of a three-decade low of $1.2798 struck on July 8. The pound had been under pressure earlier this month on expectations that the Bank of England might have to ease monetary policy further in coming months.
The central bank cut rates to a record low on Aug. 4 and restarted an asset-buying programme to cushion the economy from an expected post-Brexit slowdown. But after the recent data, some investors are reassessing the chances of further easing.
Focus will now turn to a speech by the chair of the Federal Reserve, Janet Yellen that may provide clarity on whether U.S. interest rates will rise this year. Yellen's keynote address at a global gathering of central bankers is due at 1400 GMT.
"Dovish signals from Yellen will see traders start to rule out any chance of a near-term US rate hike and could weaken the dollar," said Nawaz Ali, currency strategist at Western Union.
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