LONDON Jan 6 Sterling fell back against a
dollar that was boosted by U.S. labour market data on Friday but
still ended the week slightly higher, riding out nerves about
the British government's preparations for Brexit talks due to
start in March.
Prime Minister Theresa May is expected to try and quash
charges of indecisiveness - The Economist's front page this week
calls her "Theresa Maybe" - with a speech later this month
outlining her central aims for talks with the other 27 members
of the European Union.
There may be little comfort in that for financial investors,
however, with British newspapers reporting the speech will make
control of immigration a red line that will not be sacrificed in
return for membership of the EU single market.
Worries about a big economic hit as a result of such a
stance have been at the heart of sales of sterling since the
referendum vote to leave the EU last June. Yet, helped by
better-than-expected economic data, the currency has proved
fairly robust since early November.
It hit a 2-1/2-week high of $1.2432 on Thursday,
and though it was over a cent lower than that on Friday at
around $1.2310 it was still up about 0.3 percent on the week.
"This is mostly a dollar move - in terms of data flow
there's been nothing from the UK that's really caught the
market's attention," said BNP Paribas currency analyst Sam
The dollar received a boost when data showed a rebound in
wages that, despite U.S. employment increasing less than
expected in December, pointed to sustained labour market
momentum. That likely sets up the economy for stronger growth
and further interest rate increases from the Federal Reserve
The greenback's strength explained sterling's weakness in
that currency pair, but the pound was also down half a percent
against the euro at 85.77 pence.
Strategists said this could be partly due to position
adjustment ahead of the weekend, as well as continued Brexit
"Brexit remains a dominant theme for the direction of the
pound," said Derek Halpenny, head of global market research at
Japan's MUFG in London.
He said that as important as the government's stance on
immigration and the single market would be whether May puts more
emphasis on seeking a longer transitional period to smooth an
exit that would otherwise be due within two years of starting
"The longer the transition, the less concerned markets
should be over negative implications, which should help support
the pound," he said.
(Editing by Richard Lough)