* 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, April 26 Sterling dipped versus the
dollar and euro on Wednesday, struggling for direction ahead of
first quarter growth numbers due on Friday in a week so far
dominated by events in the euro zone.
The pound sank to a two-week low versus the euro on Tuesday,
as the single currency bounced for a second day following
market-favoured centrist Emmanuel Macron's victory in the first
round of French presidential elections.
It stayed close to those levels on Wednesday, dipping 0.1
percent on the day to 85.16 pence per euro.
Against the dollar, sterling was 0.2 percent lower at
$1.2819, around a cent off six-month highs hit last week when
British Prime Minister Theresa May made a surprise announcement
of an early general election in June.
Besides the gross domestic product numbers due on Friday,
investors are on the lookout for fresh news surrounding
Britain's exit from the European Union.
That process largely seems to have been put on hold by the
election, although May will meet with European Commission
President Jean-Claude Juncker and the EU's top Brexit
negotiator, Michel Barnier, in London on Wednesday.
"The chief driver of sterling in the last few days and this
week really has been the direction of the euro and the dollar,"
said Alvin Tan, currency strategist at Societe Generale.
"There haven't really been any major sterling-specific
events in the last couple of days. So really sterling is kind of
caught in between a stronger euro and a weaker dollar."
The pound surged by as much as 4 cents on May's announcement
last week, but its failure to push on since points to the doubts
that remain in the market about the outlook for the currency and
the UK economy in the months ahead.
Deutsche Bank revised up its sterling forecasts last week
and said that the election decision might be a "game-changer"
for the pound, down 20 percent against the dollar since the
Brexit vote last June.
But market bets against the pound are still close to record
highs and were only trimmed slightly during last week's moves.
Stephen Gallo at BMO Capital Markets said the spectre of
Brexit negotiations would continue to weigh on the pound.
"Polls suggest the result will be a much bigger Conservative
majority in the lower house, which would increase the likelihood
of the UK reaching an internal political consensus on a Brexit
strategy," he wrote in a quarterly outlook.
"However, this doesn’t change the likelihood that the first
phase of negotiations with the EU will be marked by sharp
discord that is likely to be negative for the pound (and euro)."
(Reporting by Ritvik Carvalho)