Sharjah24 - Reuters: Britain's pound fell against the dollar on Wednesday, pulling away from almost two-week highs after data showing British inflation rising to a 40-year record raised concerns about a sharp economic slowdown given the pain inflicted on consumers.

At 1505 GMT, sterling was down 0.7% at $1.24225, having fallen as much as 1% in morning trading. It had also overnight, before the data, briefly touched its highest level in almost two weeks at around $1.25.

The drop reverses most of the gains made on Tuesday when strong labour market data had boosted expectations that the Bank of England would have to further increase interest rates.

But the latest inflation numbers fuelled fears that the threat of recession may temper how far the central bank can go, having delivered four rate hikes since December.

"Yesterday it looked like with wage growth rising and unemployment so low it meant that the bank had more room for manoeuvre," said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

"Now the eye wateringly high costs for consumers is going to lead to dropping consumer spending power which will have a deep impact on output in the UK economy."