* 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
LONDON, March 31 Sterling slipped against the
dollar on Friday, as investors readied for the European Union's
official response to Britain's letter of exit from the bloc, as
well the final verdict on Britain's economic output last year.
EU Council President Donald Tusk will send leaders of the
other 27 member states his proposed negotiating guidelines for
Brexit talks before presenting the main points in Malta two days
after British Prime Minister Theresa May formally triggered the
two-year withdrawal process.
Meanwhile, revisions to fourth quarter UK GDP (Gross
Domestic Product) are expected at 0830 GMT, giving investors a
final snapshot of Britain's economic performance in 2016
following last June's Brexit vote.
Both events will be watched by investors as Britain gears up
for what could be a tough period of political jousting with the
European Union over the terms of its exit.
The pound was 0.1 percent lower at $1.2450 in
London morning trade.
It was 0.2 percent lower at 85.73 pence per euro.
"I think we can assume the initial (EU) response is going to
imply...the costs of the divorce bill need to be settled first,
perhaps at least in principle," said Jeremy Stretch, currency
strategist at CIBC World Markets.
"As a realization that that's the first point of contention
between the two sides (Britain and the EU), then that might be
just a cautious reason to suggest that sterling may soften a
little this morning."
Political uncertainty surrounding Brexit and signs the UK
economy is slowing as Britain enters a negotiating period with
the EU have seen investors take net short positions on the pound
versus the dollar to record highs.
British house prices fell in March for the first time since
mid-2015, mortgage lender Nationwide said, adding to signs that
households are turning more cautious.
And separate data showed British consumer morale steadied in
March but households remain downbeat about the outlook for the
Credit Agricole strategists said there was limited potential
for a surprise in Friday's revised UK GDP numbers.
"In any case such data is backward looking and will not have
any major impact on monetary policy expectations and/or the
currency. We stay of the view that sterling is a sell on rallies
within the last few months’ trading range," they wrote in a note
Investors are also contemplating the risk of a broader
breakup of the United Kingdom.
Scottish First Minister Nicola Sturgeon has written to Prime
Minister Theresa May formally demanding that she allow a second
referendum to be held on Scottish independence ahead of the
United Kingdom's exit from the European Union.
(Reporting by Ritvik Carvalho)