The pound was flat on Thursday (27 October), failing to capitalise on official data showing the UK economy defied fears of a Brexit-related slowdown and grew more than expected in the third quarter.

The GDP figures initially boosted sterling, which hit a one-week high of $1.2263 shortly after the release, but the gains were short lived and the UK currency soon retreated against its major rivals. By early afternoon, the pound was 0.04% higher against the US dollar, exchanging hands at $1.2252, and 0.08% lower against the euro, fetching €1.1213.

According to the Office for National Statistics, the UK economy grew by 0.5% over the third quarter of 2016, in the three months after the EU referendum, down from 0.7% for the second quarter. However, the figure exceeded analysts' forecast calling for a 0.3% growth.

In year-on-year terms, the country's economic growth came in at 2.3%, up from 2.1% noted over the corresponding quarter last year.

"This resilience reinforces expectations that the Bank of England should be in no rush to cut interest rates next week," said Chris Saint, senior analyst, at Hargreaves Lansdown Currency Service.

"Particularly as we will soon have an update on the government's fiscal measures to support the economy when we hear Chancellor Hammond's autumn statement on 23 November."

John Hawksworth, chief economist at PwC, meanwhile, warned Brexit fears had not yet completely dissipated, but could take longer to affect the economy.

"It looks like the economic impact of Brexit is more likely to be a gradual drag on growth over the next few years as negotiations with the EU proceed, rather than a short, sharp shock," he explained.

Elsewhere, the dollar's rally abated, as the greenback retracted from the multi-month highs it hit over the past couple of weeks, after some disappointing economic data. According to official figures, orders for durable goods fell 0.1% year-on-year in September, compared with analysts' expectations for a 0.1% gain and down from the 0.3% rise recorded in the previous month.

The US currency was 0.16% lower against the euro, trading at 0.9152 euro cents, and fell 0.13% against its Canadian counterpart, exchanging hands at CAD$1.3366.

"The dollar has been performing exceptionally well because the odds are really high that the Fed is going to increase the interest rate after the US elections," said Naeem Aslam, chief market analyst at Think Markets UK.

"But the data of this nature is clearly a threat for an interest rate hike, and if the Fed increases the interest rate on the back of weaker economic data, the market is not going to like it."

The greenback, however, did manage to gain ground against the Australian dollar, rising 0.41% to AUD$1.3129 after the latter pulled back from the highs it reached in the previous session on the back of better than expected GDP data.

The US dollar was also 0.26% higher against the yen, trading at ¥104.74.