* Graphic: sterling and gilt yields bit.ly/2dgAXn1
* Graphic: World FX rates in 2016 tmsnrt.rs/2egbfVh
By Jemima Kelly
LONDON, Dec 21 Sterling traded around a
one-month low against the dollar on Wednesday in thin
pre-Christmas trade, kept under pressure by uncertainty over how
Britain's departure from the European Union will pan out.
Data showing Britain's public finances with a slightly
bigger-than-expected deficit in November, but on track to meet
new, less ambitious deficit reduction goals, had little impact
on the pound.
By 1625 GMT it was trading flat on the day at $1.2365, close
to Tuesday's one-month low of $1.2313.
Sterling has for the past six months been less sensitive
than usual to economic data, driven more by concerns over
Britain's EU exit. Any signs that a hard Brexit, in which
Britain loses access to the single market, may be on the cards
have tended to drive down the currency, with indications to the
contrary giving it a boost.
British Prime Minister Theresa May has said that she will
trigger Article 50, which starts the formal departure process,
by the end of March.
"Brexit risks are likely to re-emerge as we near the formal
start of exit negotiations in the first quarter of 2017,
refocusing the market's attention on the UK's large current
account deficit and the necessary adjustment, which we see as
likely to result in further sterling weakness," wrote UBS
strategists in a research paper.
An easing of concerns over a hard Brexit had led to a 5
percent recovery in sterling against the dollar between
mid-October and mid-December, after a court ruled that the
government could not trigger formal Brexit talks without
But that rebound ended abruptly last Wednesday when, after
hiking interest rates for the first time in a year, the U.S.
Federal Reserve indicated they could rise as many as three times
in 2017, having flagged just two likely hikes in September.
That sent the dollar soaring, with sterling losing almost 3
percent against it since then.
Although it has slipped a little against the euro this week
and was down half a percent on Wednesday at 84.44 pence, the
pound is still close to five-month highs of 83.05 pence touched
earlier this month.
"If we're talking about UK idiosyncratic developments, I
think euro/sterling is a better expression (than
sterling/dollar)," said Barclays currency strategist Hamish
"Given where we were in early November - essentially at 90
pence or above - that reflects the fact that there's been a
general move away from that hard Brexit scenario."
(editing by John Stonestreet; editing by John Stonestreet)