LONDON, April 13 (Reuters) - Sterling rose to its highest since last June on Thursday, as the dollar hovered at a two-month low after a slowdown in U.S. inflation, while data showed the UK economy essentially stagnated in February.
Britain's economy showed no growth in February as strikes by public workers hit output, but a bounce in January was stronger than first thought, meaning a recession is a bit less likely to be brewing in early 2023.
"It's all a bit of a broad dollar story today", said Simon Harvey, head of FX analysis at Monex Europe, describing the UK data as "fairly lagged" in terms of any kind of influence on monetary policy.
The pound was 0.2% higher against the dollar at $1.2507 by 1040 GMT. The pound , meanwhile, was 0.1% lower against the euro at 88.10 pence.
The upward revision to January's growth to 0.4% from 0.3% means Britain is likely to avoid the first-quarter contraction that the Bank of England predicted last month, but data due next week is seen as more important for monetary policy.
"Data next week on inflation and retail sales, but especially jobs data for February, will be crucial because the PMI for the month suggested maybe demand has picked back up again," said Harvey.
The BoE has raised interest rates 11 times in a row in its battle to bring down inflation, which rose to 10.4% in February. Markets are pricing in a 64% chance of a further 25 basis point hike in May, and a lesser chance of no change .
"We don't think they're going to hike again," said Harvey, "but there is a non-negligible risk that they would if the data comes in quite strong."
A murky economic backdrop also remains in focus. A BoE survey on Thursday showed British lenders expect to rein in the supply of mortgage loans in the coming quarter, but increase the supply of consumer credit and corporate loans.
Meanwhile, a survey showed Britain's housing market continued to feel the pinch of higher borrowing costs in March, but property surveyors expect some improvement over the year ahead as they think interest rates are now near their peak.
