* Retail sales grow 1% in June, smashing forecasts
* Lawmakers back move to make no-deal Brexit harder
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
* Graphic: Trade-weighted sterling since Brexit vote http://tmsnrt.rs/2hwV9Hv (Adds quotes, updates prices)
By Tommy Wilkes and Olga Cotaga
LONDON, July 18 (Reuters) – The pound rebounded on Thursday after stronger-than-expected retail sales numbers, also finding support from a vote by lawmakers to make it harder for Britain’s next prime minister to try to force a no-deal Brexit.
MPs approved the final wording of the plan, although an already stronger sterling reacted little.
Boris Johnson, the favourite to succeed Prime Minister Theresa May, has said Britain must leave the European Union by Oct. 31 with or without a deal and has refused to rule out suspending parliament to prevent lawmakers from trying to block his exit plan.
That has rattled investors who fear a government under Johnson would increase the risk of a no-deal Brexit, and this week they dumped sterling, which dropped to a 27-month low against the dollar and a six-month low versus the euro.
But on Thursday the currency recovered some of those losses, with traders who had bet against it taking some profits.
Explaining sterling’s strength, analysts also cited media reports which said EU chief negotiator Michel Barnier was open to alternative border plans for Ireland – a major sticking point in Brexit negotiations. The Irish prime minister said likewise.
But many expect tumultuous times for sterling as the Brexit deadline nears.
“There is going to be an intensification of a no-deal Brexit scenario as October approaches,” said John Wraith, head of UK rates strategy at UBS.
Several economists have predicted UK gross domestic product shrank in the second quarter, but the unexpected rebound of retail sales in June may raise hopes that the economy kept growing.
Nomura strategists however warned that this set of data is highly volatile. “Sizable monthly rises often follow on from sizable monthly falls and vice versa.”
Adam Cole, strategist at RBC Capital Markets, said its UK economic surprise index has swung from strongly positive to strongly negative over the last couple of weeks.”
“While sterling’s recent underperformance is mostly related to a rising political risk premium, weak economic data have also played their part,” he said.
The pound was up 0.4% at $1.2477, after rising to as high as $1.2494, a two-day high, and further away from the 27-month low of $1.2382 hit on Wednesday.
Against the euro, sterling increased 0.4% to 89.92 pence, retreating from a high of 89.795 earlier.. It had hit a six-month low of 90.51 on Wednesday. (Reporting by Tommy Wilkes and Olga Cotaga; editing by John Stonestreet)