LONDON Jan 5 Sterling slipped back against the
dollar and took its biggest tumble against the yen in over two
weeks on Thursday, although more upbeat UK economic data, this
time from the dominant services sector, helped limit the damage.
The services Purchasing Managers' Index (PMI) beat all
forecasts, showing the key engine of the economy grew in
December at the fastest rate since mid-2015. A run of economic
surveys this week have shown no impact yet from the UK's
soon-to-start Brexit negotiations.
The PMI release lifted sterling back above $1.23 from
$1.2280 beforehand and roughly halved its losses on the euro
and the yen to leave it at 85.27 pence per
euro and buying 143.53 yen.
The pound had been having its worst day against both in two
weeks, buffeted by wider FX markets turbulence after China
orchestrated a sharp jump in the yuan.
If the data continues to be strong "it should question many
analysts' view that the pound will be sluggish," said Nordea
bank FX Strategist Aurelija Augulyte. "We would love to see
cable (GBP/USD) at $1.25 within a couple of months."
Traders were also digesting news from late on Wednesday that
a senior career diplomat, Tim Barrow, had been appointed as
envoy to the European Union after the previous ambassador had
suddenly quit and criticised the government's Brexit
The pound tumbled 16 percent against the dollar and 14
percent against the euro in 2016, its worst annual performance
in eight years, with the bulk of those falls coming after
Britain voted on June 23 to leave the European Union.
Uncertainty over how Britain leaves the bloc and worries
over the likely economic impact are continuing to weigh on the
currency but the run of positive data surprises are now raising
questions for analysts.
"Sterling lately seems to have become be a bit low-beta
against the dollar so the move here has been about this crazy
intervention from China, which has halted the dollar rally and
forced a lot of position squaring," said Saxo bank's head of FX
strategy John Hardy.
(Reporting by Marc Jones; Editing by Catherine Evans)