LONDON Jan 4 Sterling inched higher against a
broadly weaker dollar on Wednesday after hitting a two-month low
on a volatile first day of 2017 trading in London when Britain's
chief EU negotiator quit.
The pound gained 0.1 percent on the day in early deals to
trade at $1.2256 but was 0.1 percent lower at 85.12 pence per
euro after hitting a two-week high of 84.51 pence on Tuesday.
Data on the economy continues stronger than many economists
had expected after last June's vote to leave the European Union,
with a survey on Tuesday showing manufacturing growth at a
two-and-a-half-year high last month.
But politics are widely expected to weigh on the pound at
least until the promised formal start of talks on leaving the
27-country bloc in March.
Analysts said the early departure of Britain's outgoing
ambassador and a leaked resignation letter that called on
colleagues to challenge "muddled thinking" added to uncertainty.
"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 strategis 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
The monthly purchasing managers' index (PMI) for the
manufacturing sector rose to 56.1, the strongest since June
2014. That exceeded all forecasts in a Reuters poll, which
pointed to a decline to 53.1, adding to signs that the economy
ended 2016 strongly.
Construction PMI numbers, as well as Bank of England credit
and mortgage data are due later on Wednesday.
(Editing by Louise Ireland)