LONDON - The pound recovered from early losses on Thursday after new British Prime Minister Liz Truss announced policies aimed at mitigating surging energy prices, but it failed to climb too far up off its 37-year low against the dollar hit the day before.

Sterling was last at $1.1562, up 0.23% on the day, having fallen as low as $1.1479 earlier in morning trade. It hit $1.1407 on Wednesday, its lowest since 1985.

Truss announced a cap on soaring consumer energy bills for two years on Thursday in a package aimed at limiting the economic shock of the war in Ukraine that could cost the country about 150 billion pounds ($172 billion).

"The highlight of the Truss announcement is the energy intervention, expected to curb peak inflation by up to 5 percentage points," said Kenneth Broux, currency strategist at Societe Generale.

"For the market, this is the big takeaway. The reason cable (sterling/dollar) has come down so much is not just a strong dollar but also the surge in inflation expectations."

Broux added that the UK inflation curve was reacting positively to the headlines and if inflation expectations come down "that saves the pound from new lows," though he said it was too early to recommend buying sterling on the dips.

The pound has lost nearly 15% against the dollar so far this year, also hurt by slowing economic growth.

The pound hit a fresh two-and-a-half month low of 86.95 pence per euro early in the session before recovering a touch.

The euro, as well as most other major currencies, has tumbled against the dollar this year.

The day's other main event is the European Central Bank's policy meeting. Markets are waiting to see whether the ECB will go for a large 50 basis-point rate hike or a record 75 basis-point one.

(Reporting by Alun John; aditional reporting by the London markets team; Editing by Bradley Perrett and Hugh Lawson)