(Updates with UK data, adds quote)
LONDON, Sept 9 Sterling was firm on Friday, on
track for its fourth straight week of gains against the dollar,
as investors trimmed bets against the currency after data showed
the country's yawning trade gap shrinking in July.
Overall trade deficit narrowed to 11.764 billion pounds from
12.40 billion pounds as exports outpaced imports, and broadly in
line with expectations. The Office for National Statistics,
however, said it was too soon to know if the sharp fall in
sterling after Britain voted to leave the EU was behind the rise
in export volumes.
Analysts said the shrinking trade gap bolstered hopes that
external trade would make a positive contribution to overall
growth in the third quarter and added to evidence of the
economy's resilience, following the Brexit vote.
"The weak pound is making British exports a lot more
competitive, which was one of the chief economic benefits
promised by many Brexiters before the referendum," said Neil
Wilson, analyst at ETX Capital.
"However it's important to note, as the ONS does in its
release, the very close correlation of import and export prices
for the UK, which ought to limit the positive impact of a weak
pound longer term."
Sterling was a tad higher at $1.3305 but trading
well below a seven-week high of $1.3445 struck on Tuesday.
It was flat against the euro at 84.73 pence,
having struck a one-week low of 84.95 pence on Thursday after
ECB President Mario Draghi disappointed some investors by saying
European Central Bank policymakers had not discussed an
extension of its asset purchase plan.
Separately, construction volumes were unchanged in July
after a 1.0 percent drop in June, a smaller fall than the
average 0.8 percent decline forecast in a Reuters poll, the ONS
Nevertheless, sterling has been weakening since Wednesday,
when Bank of England Governor Mark Carney reiterated to
lawmakers that the central bank remained ready to take "whatever
action is needed" to help the economy weather the aftermath of
the Brexit vote.
On Wednesday, weak British manufacturing output data for
July painted a less rosy picture of the aftermath of the June 23
EU referendum, serving a reminder to investors about the risks
The data were the first official figures to cover output
solely for the period after the vote. Britain was plunged into
political chaos in the weeks after the vote and before the
formation of a new government under Prime Minister Theresa May.
"We still like being short sterling/dollar and long
euro/sterling as the pound's bounce runs out of steam," said Kit
Juckes, currency strategist at Societe Generale.
(Editing by Catherine Evans and Dominic Evans)