(Fixes typo in headline)
LONDON Jan 4 Sterling inched higher against a
broadly weaker dollar on Wednesday, with solid indications of
business and consumer sentiment helping pull it back from
two-month lows hit on a volatile first day of 2017 trading.
The early departure of Britain's ambassador to the European
Union, and the tone of his resignation letter, have added to
concerns of a rocky few months in prospect for sterling as
Britain prepares formally to launch talks on leaving the bloc.
But data on the economy itself remains far stronger than
many economists feared after the vote for a Brexit last June,
and construction industry and consumer credit data on Wednesday
both beat forecasts.
Tuesday's survey of factory purchasing managers also showed
manufacturing growth hit a 2-1/2-year high last month.
"Other sectors have already predicted increased prices and
trimmed forecasts for the months ahead due to a weak pound, but
the all-important construction industry seems to have avoided
the same fate," said Dennis De Jong, managing director at online
currencies broker UFX.
"With Article 50 due to be triggered in a few months' time,
uncertainty will surely affect the construction industry for the
foreseeable future. Long term planning for construction projects
is sure to become more challenging, but today's data indicates a
solid foundation remains."
Sterling gained 0.3 percent on the day to trade at $1.2276
after the numbers and was steady at 85.02 pence per euro, down
from a two-week high of 84.51 pence on Tuesday.
Politics are widely expected to weigh on the pound at least
until the promised formal start of exit talks with the EU's 27
other members in March.
In his letter to staff, outgoing EU ambassador Ivan Rogers
called on colleagues to challenge "muddled thinking" and said
that Prime Minister Theresa May's objectives for Brexit were
still unknown to her government's representatives in Brussels.
"I don't think any of that story can be positive for the
currency. It highlights the uncertainty that has weighed on
sterling for some time," HSBC strategist Dominic Bunning said.
"It is not a massive new reason to sell cable and was
probably offset by the positive economic data we got yesterday.
But the gains in the past few hours are really just a dollar
(Editing by Catherine Evans)