LONDON (Reuters) - Sterling won some respite on Thursday after enduring two days of losses, gaining robustly against the euro after European Central Bank chief Mario Draghi said the bank made only marginal upward adjustments to its inflation projections.

Sample polymer five and ten GB pound banknotes are seen on display at the Bank of England in London September 10, 2013. REUTERS/Chris Ratcliffe/pool

The euro fell broadly after the market perceived those upward adjustments as rather dovish, a move that helped the pound outperform against the single currency.

The ECB nudged up its inflation forecast for 2016 but predicted price growth would remain below target through 2018.

It raised its 2016 inflation projection to 0.2 percent from 0.1 percent and kept its 2017 forecast at 1.3 percent. For 2018, the end of its forecast horizon, the ECB stuck to its prediction for an inflation rate of 1.6 percent - still short of its target close to but just below 2 percent.

The euro fell 0.5 percent against the pound at 77.23 pence, retreating from a two-week high of 77.765 pence struck earlier in the day. Against the dollar, sterling rose 0.3 percent to $1.4458, having fallen to $1.4385 on Wednesday, its lowest in two weeks.

“The euro has settled lower against the dollar and other crosses, including the pound, with the inflation projections not impressing the market much,” said a spot trader.

Earlier, in the day, a softer-than-expected construction sector survey had a fleeting impact on the pound, which has been plagued by worries over Brexit.

Markit said its monthly survey of construction purchasing managers showed the weakest overall growth in activity growth since June 2013, with its headline construction PMI dropping to 51.2 from April’s 52. Economists in a Reuters poll had expected the index to hold steady at 52.0 in May.

Data released on Wednesday showed the manufacturing sector was barely expanding in May due to uncertainty over Britain’s referendum on EU membership.

“There was very little reaction to the PMI data which suggests that the currency is hostage to Brexit related polls,” said Richard Falkenhall, currency strategist at Nordic bank SEB.

Sterling has been weighed down since late last year by worries over the June 23 referendum on EU membership. Britain’s hefty current account deficit - 7 percent of output in the last quarter of 2015 - makes the economy, and the currency, vulnerable to any pull-back in investment flows.

POLLS TO DICTATE

Chris Turner, head of currency strategy at ING said sterling has been weighed down since polls over the weekend veered towards the “Leave” campaign.

While a YouGov poll published on Wednesday showed British voters evenly split between “Remain” and “Leave”, two surveys the previous day - one online and one conducted via telephone - showed a move towards leaving the EU.

Bookmakers shortened their odds on a Brexit, with betting website Betfair putting the chances of a vote to leave at around 27 percent on Thursday, having shown around a 17 percent chance last week after several polls put the “In” camp ahead.

Reflecting the nervousness, the one-month sterling/dollar implied volatility - a gauge of how sharp swings will be over the June 23 referendum date - traded at 20.40 percent, having risen to 21 percent on Wednesday, its highest level since the depths of the global financial crisis in early 2009.