March 2, 2017 / 4:53 PM / in 5 months

Pound dips to 6-week low as dollar grinds higher

3 Min Read

* Graphic: Sterling and gilt yields bit.ly/2dgAXn1

* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh

* Graphic: Trade-weighted sterling since Brexit vote tmsnrt.rs/2hwV9Hv

By Ritvik Carvalho and Jemima Kelly

LONDON, March 2 (Reuters) - Sterling edged down to a six-week low on Thursday against a dollar, boosted by expectations of a March U.S. interest rate hike, while data painted a mixed picture of Britain's economy.

A survey on Thursday showed Britain's construction industry growing slightly in February but new orders slowed. That followed Wednesday's marginally weaker-than-expected figures from the manufacturing sector.

Sterling fell by 0.1 percent on the day to $1.2274 by 1630 GMT but was far more robust against the broadly stronger dollar than a handful of other major currencies including the yen and the Australian and New Zealand dollars.

The pound inched higher on the day to 85.68 pence per euro.

"Investors are very mindful of the inherent political risks in the UK and the dollar-based interest rate resilience in the U.S.," said Jeremy Stretch, head of currency strategy at CIBC World Markets.

A Reuters poll on Thursday showed currency strategists expect a slow, orderly decline in the pound once Britain formally triggers Brexit talks. It has lost almost a fifth of its value against the dollar since June's EU referendum.

A spokesman for Theresa May said on Thursday the Prime Minister was clear that the legislation needed for her to trigger formal divorce talks with the European Union should be passed by parliament unamended, after its first version suffered a defeat in the upper house on Wednesday.

"If she can trigger Brexit as per her deadline, it may push sterling even lower as this will send the message that Theresa May is in full control and her hard Brexit (prioritising immigration control over single market access) is taking shape," said Think Markets market analyst Naeem Aslam.

He suggested a level of $1.18 for the pound in that scenario.

A number of major banks have made similar forecasts in the past week, with the triggering of Article 50 talks on leaving the EU another likely catalyst.

"We expect euro/sterling to move even higher in coming months, ahead of and after the triggering of Article 50," wrote currency strategists from Danske bank, who have 87 pence per euro as their three-month projection.

"That said, euro/sterling is not only affected by political uncertainty in the UK but also in Europe, not least due to the French presidential election, which may put downward pressure on euro/sterling if Marine Le Pen gains momentum in polls." (Editing by Alison Williams and John Stonestreet)

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