Stock markets mostly fell on Wednesday, with investors awaiting key clues on the outlook for US interest rates from Federal Reserve chief Jerome Powell.
The pound rebounded from more than two-year lows versus the dollar, as official data showed Britain's economy rebounded in May, with gross domestic product growth of 0.3% following GDP contraction of 0.4% in April.
"The pound caught some bid as the UK economy bounced back in May following the decline in April," noted Neil Wilson, chief market analyst at Markets.com.
"But traders need to be careful as Brexit uncertainty remains the major drag on sterling, whilst the dollar is showing some resilience and could be exposed to significant upside risks if Powell today disappoints the market by not being as dovish as investors hope."
Fed officials have helped spur a rally in world equities in recent weeks by taking an increasingly dovish tone regarding monetary policy, fuelling expectations they would cut borrowing costs sharply to support a stuttering economy.
But hopes for a deep reduction were dealt a blow on Friday by data showing the US created far more jobs than expected in June. The report sparked a sell-off in stocks and sent the dollar surging.
Powell is now due to appear before both houses of Congress to give his opinion about the state of the world's top economy, which investors will pore over for an idea about his interest rate plans.
Observers said that while a big cut -- of half a percentage point -- has all but been dismissed, the Fed is expected to unveil at least a quarter-point reduction at its next gathering this month.
"It's unlikely the Fed would risk ignoring the markets' signalling, especially after taking a dovish turn at the June (policy) meeting, which sparked a broad risk-on rally and overshadowed concerns about slowing US and global growth," said Stephen Innes at Vanguard Markets.
Elsewhere Wednesday, oil prices jumped more than two percent after a closely watched industry report showed a massive drop in US stockpiles last week, while traders also cheered reports that Russian output fell in July to its lowest in nearly three years.
The developments provided a boost to the commodity, which took a hit earlier in the week as a stronger dollar added to ongoing worries about the trade war and soft global outlook.
Still, analysts said prices will remain volatile as investors weigh the trade row against geopolitical tensions in the Middle East.