(Updates after U.S. GDP data, details)
* Sterling poised for biggest weekly gain in a year vs dollar
* U.S. GDP misses forecasts, hurts dollar
* Trade-weighted sterling at 2-1/2 month high
By Anirban Nag
LONDON, April 26 (Reuters) - Sterling hit a two-month high against a weaker dollar on Friday after U.S. growth data missed forecasts, though gains may be shortlived given a still more promising economic outlook in the United States than in Britain.
The pound has also been supported by better-than-expected UK first-quarter growth data on Thursday, when sterling scored its biggest one-day percentage gain in nine months on relief that Britain had avoided another recession.
But the British economy still looks shaky. With the government continuing an austerity drive aimed at lowering its debt burden and Britain's largest trading partner, the euro zone, mired in a recession, sterling was likely to struggle to make further inroads against the U.S. currency, traders said.
Sterling was up 0.3 percent at $1.5477, having hit a two-month high of $1.5499 after the U.S. data was released. The world's largest economy grew at an annualised clip of 2.5 percent in the first quarter, but it fell short of expectations for a 3 percent rise, pulling down the dollar broadly.
The data kept alive chances the Federal Reserve would keep policy ultra-loose.
The pound extended gains into a third straight session on Friday and was poised for its largest weekly gains in a year. Chartists noted resistance was at its Feb. 15 peak of $1.5550 and its 100-day moving average of $1.5579.
"We could still see some of stale short bets against sterling getting squeezed which would see it rise to $1.55 and beyond," said John Hardy, currency strategist at Saxo Bank. "But it is not sustainable there and sterling/dollar should make a turnaround."
QE DEBATE POSTPONED
The better-than-expected British GDP data has reduced the chances of more quantitative easing (QE) from the Bank of England in the near term and pushed sterling's trade-weighted index to a 2-1/2 month high of 81.20. More QE increases the supply of the currency and lowers its value.
Still, the BoE could opt for further monetary easing if the nascent recovery lost momentum. Besides, expectations are building that incoming governor Mark Carney, who takes over in July, could resort to more aggressive monetary easing in the face of tight fiscal policies.
"Despite this positive reaction to the growth data, we remain sceptical regarding the sustainability of gains. Hence, we would look to use sterling/dollar rebounds into the $1.5550 area to re-establish bearish positions," Morgan Stanley (Xetra: 885836 - news) said in a note.
Saxo Bank's Hardy said the most attractive way to play sterling's near-term gains would be against the euro. Expectations of an interest rate cut by the European Central Bank next week have gathered pace and with the BoE likely to stand pat in the near term, euro/sterling could weaken.
The euro was down 0.2 percent versus sterling at 84.05 pence having fallen to 83.98 pence earlier on Friday, its lowest since late January.
Stephen Gallo, currency strategist at BMO Financial Group, recommended investors to take short euro/sterling bets targeting a drop to 82.20 pence in the coming two weeks.
"Short-term growth dynamics appear to have moved in favour of the UK over Germany for the time being," Gallo wrote in a note. "Additionally, we view the forthcoming May ECB rate decision ... as the best and most likely trigger for a move lower into the 82/82.20 pence range." (Editing by Susan Fenton)