(Updates prices throughout)
By Jemima Kelly and John Geddie
LONDON Dec 9 Sterling was lifted on Friday by
data showing Britain's trade deficit narrowed more than expected
in October, although the pound remained on track for its first
weekly fall in four.
The currency was hit this week by lawmakers saying they
would stick to Prime Minister Theresa May's Brexit timetable and
by weaker-than-expected industrial output data.
Friday's data showed construction output fell slightly on
the month and continued a downward trend in the three months to
October. The narrowing in the trade deficit was partly because
of big upward revisions to previous months.
The pound edged up to $1.2620, from $1.2599 just
before the data. By 1040 GMT it had slipped back to $1.2603,
leaving it up 0.1 percent on the day, down more than 1 percent
against the dollar for the week.
"The data was certainly much better than expected...However
some of that optimism does dry up when you start to look at some
of the revisions," Rabobank currency strategist Jane Foley said.
"The improvement has come from a low base so that does
dampen some of the enthusiasm. That said, many people will be
wanting to look forward and take the October data as one of the
first true reflections of the post-referendum environment."
Sterling also edged up against the euro to 84.245 pence
, adding to around 1 percent gains on Thursday after
the European Central Bank's extension of its asset-purchase
programme. But for the week, the pound was down half a percent.
The pound is now trading around 15 percent lower against the
dollar since Britain voted to leave the European Union, and
about 10 percent weaker against the euro.
Some investors and currency strategists say the pound's
close historical links to the dollar, through trade and
investment, favour sterling against the euro and other
currencies at a time when dollar strength is back on the cards.
While uncertainties surrounding the launch of talks on
leaving the EU will continue to weigh heavily on the pound, the
UK remains better placed to generate growth than other European
countries or Japan.
"The resilience of the UK economy is also highlighting the
similarities in the UK and U.S. economic cycles, (with) cyclical
lows in unemployment rates, strong consumer spending and finally
rising wage growth," MUFG's European head of global markets
research, Derek Halpenny said.
(Editing by Alexander Smith)