By Marc Jones
LONDON Jan 4 Sterling posted its first daily
rise against the dollar of 2017 on Wednesday, climbing back
above $1.23 as upbeat business and consumer data, and a pause in
the U.S. currency's upward march, pulled the pound up from a
Against the euro, however, it fell for the first time in
four sessions, breaching 85 pence per euro as the
euro zone recorded its first above-one percent inflation reading
The early departure of Britain's ambassador to the European
Union on Tuesday, and the prickly tone of his resignation
letter, added to concerns of a rocky period ahead for sterling
as Britain prepares to launch formal talks on leaving the bloc.
But economic data remains stronger than many economists
expected after June's Brexit vote, and construction and consumer
credit data on Wednesday both beat forecasts, sending sterling
up as high as $1.2306.
It came a day after figures showed manufacturing growth hit
a 2-1/2-year high last month and boosted the pound.
Markets were still trying to find their post-Christmas
rhythm, said Ned Rumpeltin, head of European currency strategy
at TD Securities, who flagged minutes from the Federal Reserve's
last meeting due to be published during U.S. trading.
"For sterling there also is zero Brexit risk premium priced
in at the moment," he added, referring to TD's differential
model, which looks at where currencies trade based on countries'
"So on that basis it means there is more room for some risk
premium to come back in the next few weeks, particularly as we
have the supreme court decision due."
Britain's impending negotiations over its divorce from the
EU are expected to keep weighing on the pound, though national
elections in France, Germany and the Netherlands this year all
hang over the euro.
Marine Le Pen, the far right's candidate in France's
presidential vote said on Wednesday that France should leave the
euro and shift to a new national currency tied to the shared
currency in similar way to the pre-euro 'ECU' era.
Sterling sagged 0.2 percent on the day to trade at 85.19
pence per euro after it was revealed Britain's outgoing EU
ambassador called on colleagues to challenge "muddled thinking"
and said Prime Minister Theresa May's objectives for Brexit were
still unknown to her government's staff in Brussels.
Wednesday's trading left sterling down from a two-week high
of 84.51 pence on Tuesday but well within a range it has held
"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
(sterling/dollar) and was probably offset by the positive
economic data we got."
(Additional reporting by Patrick Graham; editing by Richard