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Sterling dips at end of strongest week since January
February 24, 2017 / 9:50 AM / in 6 months

Sterling dips at end of strongest week since January

An employee is seen walking over a mosaic of pound sterling symbols set in the floor of the front hall of the Bank of England in London, in this March 25, 2008 file photograph.Luke Macgregor/files

LONDON (Reuters) - Sterling slid from a 2-week high to the dollar on Friday but was still on track for its strongest weekly showing in a month as concerns about politics in the United States and Europe took investors' focus off immediate Brexit worries.

Besides the Brexit bill making its way through Britain's upper house of parliament, a week largely lacking in major domestic political developments and new economic numbers has given the pound some respite.

The pound fell 0.5 percent against the dollar to $1.2496 by 1619 GMT, having touched a 15-day high of $1.2570 in morning trade in London. It was down nearly half a percent at 84.59 pence per euro.

For the week, that still gave it a 0.8 percent gain against the basket of currencies that measures its broader strength.

"Most of the action has been on the dollar crosses," said Credit Agricole's head of FX strategy Valentin Marinov.

"The big support for the pound has been the revisiting of last year's lows on euro-sterling. There are some people citing favourable technicals for the pound but I would be cautious."

A number of major banks have predicted another round of selling of sterling if talks on leaving the European Union get going next month, as planned by the government.

But a number of technical analysts have said this week that chart readings suggest even odds of a break up or down.

"Sterling may well continue to recover in coming weeks as long as market players focus elsewhere," said Richard Falkenhall, a strategist with Swedish bank SEB.

"While we see good reasons to maintain a negative view on sterling over the medium term, the political uncertainty created by upcoming elections in several euro zone countries this year and the political situation in the US currently seem to overshadow the troubles we believe will be facing the UK economy going forward."

The week was not entirely devoid of Brexit developments.

On Thursday, sources close to the Scottish government said the devolved administration in Edinburgh was increasingly confident it could win a new independence referendum and that it is considering calling one next year.

British Prime Minister Theresa May's Conservatives secured a landmark victory in a parliamentary by-election on Friday, boosting her hand ahead of the negotiations as her rivals suffered damaging poll setbacks.

"The prime minister will get what she wants and proceed with Article 50 next month, but the data has turned weaker and that doesn't bode well going forward," Marinov said.

"With that in mind, you would think about fading any rallies in the pound but we are also cautious that a lot of negatives are already in the price."

British banks approved the most mortgages in a year last month and consumer borrowing saw some of its fastest growth of the past decade, industry data showed on Friday, contrasting with earlier signs of slowing momentum.

Editing by Alison Williams

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