LONDON, Sept 9 Sterling climbed on Friday, on
track for its fourth straight week of gains against the dollar,
as investors trimmed bets against the currency ahead of data
that could show the country's yawning trade gap shrinking in
Figures due at 0830 GMT are expected to show that the
overall trade deficit eased to 11.75 billion pounds from 12.40
billion pounds as exports outpaced imports.
Exports are expected to have got a boost from the weaker
pound following June's shock Brexit vote. Analysts expect the
cost of imports to rise for the same reason, but with a slightly
Adam Cole, head of G10 strategy at RBC Capital, said that
while exports will rise as a result of sterling's fall, import
prices will rise "sharply and quickly". "Because imports are
bigger than exports, the deficit will get worse, though this may
come through to a greater degree in the August data than today's
July release," he added.
Sterling was higher at $1.3310 early on Friday but
trading well below a seven-week high of $1.3445 struck on
Tuesday. It was flat against the euro at 84.70 pence
, having struck a one-week low of 84.95 pence on
Thursday after ECB President Mario Draghi disappointed some
investors by saying European Central Bank policymakers had not
discussed an extension of its asset purchase plan.
British construction data for July is also due for release
on Friday and could show a contraction in activity after the
Brexit vote. Traders said a sharp drop could weigh on the pound.
"We still like being short sterling/dollar and long
euro/sterling as the pound's bounce runs out of steam," said Kit
Juckes, currency strategist at Societe Generale.
Sterling has been weakening since Wednesday, when Bank of
England Governor Mark Carney reiterated to lawmakers that the
central bank remained ready to take "whatever action is needed"
to help the economy weather the aftermath of the Brexit
On Wednesday, weak British manufacturing output data for
July painted a less rosy picture of the aftermath of the June 23
EU referendum, serving a reminder to investors about the risks
The data were the first official figures to cover output
solely for the period after the vote. Britain was plunged into
political chaos in the weeks after the vote and before the
formation of a new government under Prime Minister Theresa May.
(Editing by Catherine Evans)