* Graphic: sterling and gilt yields bit.ly/2dgAXn1
* Graphic: World FX rates in 2016 tmsnrt.rs/2egbfVh
By Jemima Kelly
LONDON, Dec 14 Sterling strengthened on
Wednesday as all eyes turned to a policy decision by the U.S.
Federal Reserve, with comments from Britain's Brexit Minister
bolstering expectations that Britain will keep access to the
single market when it leaves the EU.
The pound appeared largely unmoved by data released earlier
on Wednesday that showed the first decline in the number of
people in work in Britain in over a year, suggesting a slowing
in the labour market after June's vote for Brexit.
It climbed to as high as $1.2721 in afternoon trade
as Brexit Minister David Davis spoke to a committee of lawmakers
in parliament. By 1700 GMT it has eased to around $1.2716, still
leaving it up around half a percent on the day.
Davis said government would do all it could to make sure
business gets the maximum access to the European Union's single
market while minimising disruption to business in its talks with
the bloc. He also did not rule out the possibility of a
"transitional arrangement" to help businesses avoid a cliff edge
after two years of talks.
"It's quite surprising not to see sterling lower after that
labour market data, especially as it was what we've been waiting
for - the first real signs of a slowdown in the UK real
economy," said ING currency strategist Viraj Patel.
"There seems to be a sense of optimism in sterling markets
right now... and the reason is that there have recently been
steps towards a softer Brexit. Davis's comments reaffirm that -
there was nothing new and there were a lot of ifs and buts ...
but markets see less probability of a hard Brexit and that's
keeping sterling supported."
The numbers from the Office for National Statistics
suggested a six-year expansion in the labour market may be
ending, though wage growth accelerated modestly and a measure
that excludes bonuses rose at its fastest since August 2015.
"I take (today's data) as another reason to think that the
UK economy is going to run out of steam over the course of 2017,
so my bias is to go short cable (sterling/dollar)," said Societe
Generale macro strategist Kit Juckes. "I'm not going to get
super-excited about data showing ex-bonus wage growth."
The Fed is seen as all but certain to raise its main rate by
a quarter point to 0.50-0.75 percent, in an announcement due at
(Editing by Larry King)