* 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 Jemima Kelly
LONDON, Feb 28 Sterling traded close to a
two-week low against the dollar on Tuesday as investors awaited
a speech by U.S. President Donald Trump, with the pound kept
under pressure by worries about the future of Britain as it
leaves the European Union (EU).
The pound fell to as low as $1.2384 on Monday, its
weakest in a fortnight, on reports that Scottish nationalists
were preparing to demand a fresh independence referendum,
possibly as early as March, to coincide with the government's
plan to formally trigger Britain's exit from the EU.
It stayed close to that level on Tuesday, down 0.2 percent
on the day at $1.2420.
Scottish First Minister Nicola Sturgeon said in a newspaper
article on Tuesday that the "sheer intransigence" of the British
government over Brexit could lead to a second referendum.
A British government spokesperson had said on Monday there
should not be another vote, and that the mere threat of one was
creating unnecessary uncertainty and division.
ING currency strategist Viraj Patel described a possible
second independence referendum as one of a number of Brexit
"tail risks". But he said negotiations over Britain's exit from
the bloc - and not a possible Scottish exit - would be the key
driver of the pound in the months to come.
"Our economists just don't see Westminster accepting a
second referendum at least in the next 6 to 12 months," he said.
"They don't want to be battling on two fronts."
BNY Mellon strategists, however, wrote in a research note to
clients that it was surprising that sterling had not reacted
more to news about Scotland, and that talk of a second
referendum could start to become more important for markets.
"Sterling's largely indifferent reaction so far to the flow
of news on the possibility of a Scottish referendum follows the
pattern seen in the run up to the 2014 referendum," they wrote.
"However, it is also clear that since June 23, political
sensitivity has returned as a driving force for sterling... The
risk Scotland's first minister will call for a second referendum
in the aftermath of the triggering of Article 50 could start to
weigh rather more heavily on sterling in the weeks ahead."
New Bank of England Deputy Governor Charlotte Hogg said on
Tuesday that her tolerance for above-target inflation would
depend on events, and that she would be willing to stand up to
Governor Mark Carney if she did not agree with him.
Sterling showed little reaction to the comments, edging down
0.1 percent on the day against the euro to 85.25 pence
Surveys showed earlier on Tuesday that British consumer
morale sunk lower in February as rising inflation following last
year's Brexit vote made householders warier about the outlook
for their finances.
(Editing by Ed Osmond)