Sterling slips to three-week low vs dollar after Queen's Speech

By Jemima Kelly

LONDON, May 27 (Reuters) - Sterling hit its weakest against the dollar since the aftermath of the UK's national elections on Wednesday, after a speech by Britain's queen to parliament set in motion a referendum on the UK's membership of the European Union.

Queen Elizabeth announced early legislation to provide for an in-out vote before the end of 2017. Prime Minister David Cameron now faces pressure to explain exactly when it will be held and what changes to the EU he wants.

Sterling fell as much as 0.6 percent against the dollar to trade at $1.5301, its weakest since May 8 - the day that it was announced that Cameron's centre-right Conservative party had triumphed in Britain's parliamentary elections with a surprise outright majority.

"A lot of people have bought sterling over the past few days, so the market was looking for any excuse to trigger a reversal in the positioning and that's what we got," said Adam Myers, Eureopean head of FX strategy at Credit Agricole.

"Even though it's likely that the UK wants to stay in (the EU), any political uncertainty is as good an excuse as any to cause a bit of a squeeze or reversal in sterling positioning after what's been a strong run."

Analysts have been flagging concerns about a possible "Brexit". Many say the risks to a UK economy, which relies on inflows of investment and capital to fund its 100 billion-pound current account deficit, are greater now than they were during the Scottish independence referendum in September 2014.

"If the polls are close as the campaigns get underway, then the uncertainty leading up to polling day could lead to all manner of market volatility," wrote Peter Cameron, assistant fund manager at Ecclesiastical Investment Management.

Against a euro boosted by reports that Greece and its creditors were closer to striking a deal, sterling weakened half a percent to 71.015 pence, pulling away from a 2 1/2-month high of 70.565 pence hit earlier in the day.

On Thursday, the pound could be given direction by a second reading of British gross domestic product for the first quarter, which is expected to show year-on-year growth of 2.5 percent. (Additional reporting by Anirban Nag; Editing by Larry King)