(Adds quotes and context, updates prices)
By Jamie McGeever
LONDON Feb 10 Sterling rebounded on Friday and
was on track for its strongest week against the euro for almost
three months, after year-end UK manufacturing and trade data
beat expectations and allayed fears of an economic slowdown as
the Brexit process gathers pace.
A number of forward-looking indicators of sentiment have
dipped in the past 10 days, stirring nerves among investors that
a weakening of growth predicted by many economists since the
vote to leave the EU last June is finally materialising.
But manufacturing output rose 2.1 percent in December, far
higher than the 0.5 percent rise forecast in a Reuters poll. And
compared with December 2015, it was up 4.0 percent, the
strongest increase since April 2014.
Meanwhile, Britain's goods trade deficit fell to 10.89
billion pounds in December, narrower than a forecast of 11.5
billion in the Reuters poll.
"So much for the Brexit meltdown," ETX Capital senior market
analyst, Neil Wilson, said. "Today's data confirm that the UK
economy remains very resilient and lends support to the Bank of
England's decision to revise up its 2017 growth outlook."
By 1040 GMT the pound was up slightly on the day at $1.2505
, and up further from about $1.2480 just before the data
The euro was down 0.1 percent on the day at 85.13 pence
. So far this week, sterling is up nearly 1.5 percent
against the euro, which would mark its biggest weekly rise since
On a trade-weighted basis, sterling has now risen three of
the last four weeks.
The BoE last week said it now expects economic growth of 2.0
percent this year, higher than the forecasts of all but one of
50 economists polled by Reuters last month and up sharply from
its previous forecast of 1.4 percent.
Yet it is in no rush to raise rates, and on Wednesday Deputy
Governor Jon Cunliffe warned that British business investment is
likely to remain very weak in the near term after June's Brexit
Sterling came under some selling pressure on Friday after
Britain's Reckitt Benckiser agreed to buy U.S. infant formula
maker Mead Johnson Nutrition for $16.6 billion, potentially
fuelling corporate demand to exchange sterling for dollars.
But sentiment remains largely driven by domestic politics
and the near-daily twists and turns in the Brexit process.
The head of the European Commission's office in Britain said
on Friday it is unrealistic for Britain to expect to negotiate
its exit from the EU and reach a free trade agreement in two
years and both will probably need an implementation phase.
(Editing by Louise Ireland)