Sterling strengthened against the euro and dollar on Wednesday, lifted by a broad slide in the dollar and as dealers adjusted positions ahead of the Bank of England's interest rate decision on Thursday.
Sterling benefited, even though the outlook for the UK economy remained bleak: UK shares fell 2 percent, data showed the British service sector shrinking at its fastest pace in 16 years and traders braced for a steep cut in UK interest rates.
By 1600 GMT sterling was up by around 1.25 percent against the dollar at $1.6158, according to Reuters data. The euro was down 0.8 percent at 80.70 pence, and the pound was up 1 percent against the yen at 160.65 yen. On a trade-weighted basis, sterling recovered from an earlier flirtation with fresh 12-year lows to trade higher at 86.20.
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