November 10, 2017 / 9:13 AM / a year ago

Sterling struggles as political headwinds grow; data eyed

LONDON, Nov 10 (Reuters) - Sterling consolidated losses on Friday as political uncertainty around the progress of negotiations over Britain’s departure from the European Union continued to weigh on the currency.

With the clock ticking on Brexit talks and a turbulent week in Westminster ramping up doubts about British Prime Minister Theresa May’s ability to secure a divorce deal, investors were tracking the data for any signs of strength in the UK economy that could support the pound.

Industrial production, manufacturing output and trade balance numbers for the country are due at 0930 GMT. If they come in as a surprise, painting an unexpected picture of the British economy, this could affect the Bank of England’s decision-making on interest rate policy and send sterling down once again.

“The UK economy is losing momentum slowly, but it is losing momentum. Any sign that the pace of loss of momentum is picking up is going to make things harder,” said Kit Juckes, head of foreign exchange strategy at Société Générale.

On Friday it was trading flat against the dollar at $1.3142, still depressed but a cent above the month’s lows hit the week before.

It was also flat against the euro, at 88.54 pence at 0850 GMT.

The pound plummeted last week after the BoE raised interest rates for the first time in over a decade but said it was planning for only two more hikes in the next three years, pushing back investors’ expectations.

A string of scandals in Westminster, leading to two resignations from the cabinet in the space of just one week, could also be expected to push investors away from the pound.

But high levels of uncertainty in British politics have largely been priced in by the markets, analysts said, sheltering sterling to some degree.

“(Sterling) is so weak that it takes a lot of bad news to get it any lower,” said Juckes.

“It’s all terrible, but we know it’s terrible, so we’ve priced it as terrible.”

British Brexit minister David Davis will meet his EU counterpart in Brussels today as high-level divorce talks restart. (Reporting by Polina Ivanova; and Saikat Chatterjee; editing by Emelia Sithole-Matarise and Ralph Boulton)

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