By Jemima Kelly and Anirban Nag
LONDON (Reuters) - Sterling strengthened on Friday to post its first week of gains in five against a basket of currencies, benefiting from better-than-expected inflation data and a unanimous vote to keep UK interest rates steady.
The pound had fallen for four straight weeks against the Bank of England's trade-weighted currency basket <=GBP> on worries that Britain will vote to leave the European Union at a referendum on June 23, for which the official campaign began on Friday.
But it was given a lift by data earlier in the week that showed British consumer prices rose at their fastest rate in 15 months in March.
And while minutes from the BoE's latest meeting on monetary policy did show officials concerned about risks surrounding the EU referendum, all nine members of the monetary policy committee voted to keep rates unchanged, quashing speculation before the decision that two of them were to vote for an immediate cut.
"There's still a lot of negativity priced into the pound but we get swings when people have got too pessimistic, and I think at the start of the week that was the case," said BNP Paribas (PA:BNPP) strategist Michael Sneyd.
Sterling climbed 0.4 percent on Friday to $1.4217
Against the euro, the pound climbed 0.2 percent to 79.44 pence (EURGBP=D4) and was up almost 2 percent since Monday - its first week of gains against the single currency in six.
Opinion polls ahead of the EU referendum have indicated a tight race between the "Yes" and the "No" camps. Nevertheless, bookmakers are pricing in about a one-in-three chance that Britain will opt out of the union that it joined in 1973.
(Eikon readers can click cpurl://apps.cp./cms/?pageId=brexit for the latest Brexit news)
Major banks expect sterling could lose around a fifth of its value if Britain votes to leave. The International Monetary Fund also waded into the debate this week, saying a British exit would risk causing "severe global damage" that would drag down UK growth for years to come.
"Momentum still remains strongly in favour of further pound weakness in the near-term," said Lee Hardman, currency analyst at Bank of Tokyo Mitsubishi.
"The trade-weighted pound has declined in 10 out of the first 14 weeks of this year, extending its decline to just over 10 percent since late last year. It is the most persistent and deepest sell-off for the pound since the global financial crisis."