Pound rises but negative sentiment prevails

The pound skidded to one-week lows against the dollar and euro on Wednesday after below-forecast manufacturing output figures added to a string of disappointing data.

But Britons' expectations for inflation over the next 12 months rose slightly, a survey from the Bank of England showed on Thursday, helping to underpin sterling, albeit temporarily.

"Inflation expectations showed a modest uptick and sterling has moved up on the day, but this is not overly significant. I don't think it will have any impact on Bank of England policy ahead," said Lee Hardman, currency strategist at BTM-UFJ.

Hardman added sterling's bounce was most likely flow-driven, reiterating his bearish stance on the pound going into a UK general election, widely expected in May.

At 11:39 a.m., sterling was trading up around 0.4 percent versus the dollar at $1.5050, off a one-week low of $1.4873 hit on Wednesday. Euro/sterling was down around 0.4 percent at 90.75 pence, retreating from a high of 91.30 hit on Wednesday.

The Bank of England's trade-weighted sterling index edged up to 76.7 after falling to a fresh 11-month low at 76.4 on Wednesday.

Sterling has fallen 7 percent on a trade-weighted basis from its January highs.

Analysts remained jittery the threat of a hung parliament after the election would stymie efforts to deal with the UK's spiralling budget deficit.

Adding to the negative mix was concern over Britain's sovereign ratings after Fitch Ratings highlighted on Tuesday the UK's deteriorating credit profile.