LONDON: Sterling rose to a one-week high against the dollar on Thursday and its chances of further gains hung on UK third quarter gross domestic product beating or at least meeting expectations for a robust recovery after three quarters of contraction.
The data, due to be released at 0830 GMT, is forecast to show the economy emerged from recession to grow by 0.6 percent in the third quarter.
Analysts said confirmation of a solid upturn could dampen the chances that the Bank of England will opt for more monetary easing next month. Any halt in the bank's quantitative easing programme which pumps more pounds into the economy would give the currency a boost.
But traders were wary of buying the currency in large amounts given the market is already expecting a strong number after UK Prime Minister David Cameron said on Wednesday that the good news will keep coming.
Sterling rose 0.2 percent to $1.6078, recovering from a six-week low of $1.5914 struck on Tuesday.
"Sterling is holding up well in general. The question for sterling is does cable (sterling/dollar) rise faster than euro/dollar?" said Gavin Friend, currency analyst at NAB.
"We are looking for an upside surprise but that is not a suggestion that growth is improving, it is unlikely to be sustained and will slide back (next quarter) again."
The euro was steady at 80.93 pence, slightly below the its 200-day moving average of around 81.08 pence. Near-term support was seen around 80.55 pence, the Oct. 16 low.
Lloyds Bank said in a note that sterling gains on a rise in GDP that is in line with forecasts should still be seen as a selling opportunity from a medium term perspective.
They said the risks of the BoE opting for QE in November remain significant with underlying growth still weak.
Markets took comments from Governor Mervyn King on Tuesday as a sign that further QE in November was not a done deal.
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