UPDATE 1-Sterling recovers from lows, helped by strong retail sales

The British pound rose on Thursday after stronger-than-expected retail sales numbers and as traders betting against the currency took some profits following this week's plunge, which came amid new concerns about the threat of a no-deal Brexit. British retail sales rebounded unexpectedly in June, rising 1% over the previous month, according to official data. A Reuters poll of economists had forecast a month-on-month retail sales contraction of -0.3%.

Compared with June 2018, sales were up by 3.8%, stronger than all forecasts. Several economists have predicted the UK economy shrank in the second quarter but the strong retail sales numbers may raise hopes that the economy kept growing.

Sterling dropped to a 27-month low against the dollar this week after the two candidates to replace Prime Minister Theresa May appeared to push for a no-deal Brexit if they cannot renegotiate a proposed withdrawal agreement with the European Union. "Whist GBP's recent underperformance is mostly related to a rising political risk premium, weak economic data have also played their part (our UK economic surprise index has swung from strongly positive to strongly negative, -50 currently, over the last couple of weeks)," said Adam Cole, strategist at RBC Capital Markets.

The pound rose 0.4% to $1.2485 after the retail sales numbers, having traded around $1.2470 beforehand. That helped the currency move further away from the 27-month low of $1.2382 hit on Wednesday.

Against the euro, sterling recovered 0.3% to 90.030 pence. It had hit a six-month low of 90.51 pence on Wednesday. Britain is due to leave the EU on Oct. 31, and traders worry it could depart without trading arrangements with the bloc in place. That would hit the British economy, which is already struggling because of the political uncertainty around Brexit, economists say.