Sterling holds steady ahead of GDP data

The pound was steady on Friday after Thursday's drop on the back of senior aides of Prime Minister Boris Johnson saying they would hold a parliamentary election in the days after Brexit if lawmakers sink the government with a no-confidence vote.

Analysts say the election talk will weigh on the pound on Friday because it is growing increasingly likely that Johnson will face a vote of no-confidence soon after Sept. 3, when parliament returns from its summer recess. Sterling was flat at $1.2126, after falling to as low as $1.2095 the day before as it flirted with a 31-month low of $1.2080 reached last week.

Against the euro, the pound was 0.2% stronger at 92.31 pence, paring back the losses it made on Thursday when it fell to a new two-year low of 92.65 pence. Traders are awaiting British gross domestic product data, due at 0830 GMT. Economists polled by Reuters expect the June GDP to rise by 0.1% month-on-month, compared with a 0.3% increase in May, which analysts say could send the pound lower.

"The downside risk for the pound is for a contraction in growth, which would likely spur headlines about a possible recession," said Derek Halpenny, head of research at MUFG.