* Graphic: World FX rates in 2020 tmsnrt.rs/2egbfVh * Graphic: Trade-weighted sterling since Brexit vote tmsnrt.rs/2hwV9Hv (Rewrites throughout, updates prices, adds further graphics) LONDON, April 23 (Reuters) - Sterling rebounded on Friday from a sharp fall on Thursday, on track for a second week of gains against the dollar after strong retail sales data and business surveys showed Britain’s economy might already be recovering from its worst annual contraction in 300 years. British retail sales rocketed last month as consumers prepared for a partial lifting of coronavirus lockdown restrictions, according to official data that also showed record peacetime government borrowing. Sales volumes leapt by 5.4% in March from February, the Office for National Statistics said. Economists polled by Reuters had expected an increase of 1.5%. On top of retail sales, a survey showed a deluge of orders swept through British businesses in April as the country lifted some of its restrictions, pointing to a rapid rebound for the pandemic-hit economy. The preliminary “flash” reading of the UK Composite Purchasing Managers’ Index (PMI) rose to 60.0 in April from 56.4 in March, its highest reading since November 2013. A Reuters poll of economists had pointed to a smaller rise to 58.2. After having erased its gains this week on Thursday, the pound was once again set for a weekly gain on Friday, trading 0.1% higher on the day at $1.3848 by 1415 GMT. Against the euro, sterling was 0.2% lower at 86.04 pence , having hit its lowest levels in a week against the single currency. “Strong PMI data is more evident in the FX markets where both the pound and the euro are capitalising on the weaker U.S. dollar,” said Sophie Griffiths, market analyst, UK & EMEA at OANDA. “Better-than-expected retail sales data is also underpinning the pound.” POSITIVES PRICED IN There was other bright news. British consumer sentiment rose to its highest since the start of the COVID pandemic this month, a closely watched survey showed on Friday, but the increase was smaller than economists had expected. British manufacturers’ hopes for an economic rebound rose to their strongest in 48 years this month as the country began to recover. Sterling was the best performing G10 currency in 2021 two months ago, on hopes Britain’s lead in COVID-19 vaccinations would lead to a quicker economic rebound relative to peers. However, that lead has since ebbed amid factors boosting demand for other currencies, notably the dollar, which has recently been lifted by a jump in Treasury yields. Analysts also warn of political risks such as upcoming Scottish elections in May which could once again raise the possibility of a Scottish independence referendum and violence in Northern Ireland. “Many positives are in the price of the pound and this is reflected in market positioning as well as FX valuation,” said Valentin Marinov, head of G10 FX research at Credit Agricole. “There has been little focus on downside risks like the loss of the GBP vaccine advantage in recent weeks, the May 6 Scottish elections, as well as the potential for a renewed weakness of global risk sentiment in May and June because of a renewed spike in UST yields on the back of strong US data.” This suggests the risks for sterling/dollar are on the downside in coming weeks, Marinov said. Speculators’ net long position on the pound versus the dollar rebounded in the week to April 13 after slipping to its lowest since February in the previous week, futures data from the CFTC showed.