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LONDON (Reuters) - Sterling headed for its biggest weekly fall in almost three months on Friday, although data showing that the UK economy grew faster than expected in the third quarter helped lift it from a seven-week trough against the dollar.
Britain's economy expanded at a 0.6 percent pace in the three months to September, faster than the original estimate of 0.5 percent, suggesting there has been no 'Brexit' hit to the economy since the June 23 vote to leave the European Union.
But the latest UK balance of payments figures also released on Friday underlined sterling's longer-term vulnerabilities. The current account deficit widened to 5.2 percent of gross domestic product from 4.6 percent the quarter before.
"While the pound may respond positively to this morning's data, the outlook still looks weak," said Paul Sirani, Chief Market Analyst at Xtrade.
"How long the British public can continue to pump money into the economy with prices for everyday items sure to rise remains to be seen," he said.
At 1000 GMT sterling was flat against the dollar at $1.2275, having hit a seven-week low of $1.2243 before the GDP and current account data were released.
Sterling was down around a third of a percent against the euro at 85.15 pence, down for the fifth day in a row and on for its biggest weekly decline since the first week of October.
On a trade-weighted basis, the pound was down 1.6 percent this week, also the biggest fall since early October.
Activity on the last trading day before Christmas was light, with traders expected to wind down earlier than usual.
Sterling has for the past six months been less sensitive than usual to economic data, driven more by concerns over Britain's departure from the EU.
Any signs that a hard Brexit, in which Britain loses access to the single market, is on the cards have tended to drive down the currency, with signs to the contrary giving it a boost. Analysts say the trend is set to continue.
Reporting by Jamie McGeever; Editing by Toby Chopra