Sterling touches three week low vs dollar

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Thu, 10 Aug 2017 - 10:02 GMT

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Thu, 10 Aug 2017 - 10:02 GMT

FILE PHOTO: British Pound Sterling and U.S. Dollar notes are seen in this June 22, 2017 illustration photo. REUTERS/Thomas... Thomas White June 28, 2017

FILE PHOTO: British Pound Sterling and U.S. Dollar notes are seen in this June 22, 2017 illustration photo. REUTERS/Thomas... Thomas White June 28, 2017

LONDON - 10 August 2017: Sterling touched a three-week low against a recovering dollar on Thursday, as a mixed bag of output and trade data did little to alter investors' downbeat view of an economy struggling to meet Bank of England targets.

The pound fell by more than a third of a percent in early European trade to as low as $1.2952 before recovering some ground after industrial production numbers just topped economists' forecasts.

But construction output was worse than expected and other readings showed Britain's enormous external trade gap worsening further - despite the weakening of the pound over the past year.

"Although the industrial data is slightly better than expected, it doesn't materially change the growth outlook," said Sam Lynton-Brown, a strategist with BNP Paribas in London.

"We think this move (in sterling) can extend and our formal target is $1.26 at the end of this year."

The pound has lost more than 13 percent in trade-weighted terms since last year's decision to leave the European Union but Britain's trade deficit with the rest of the world remains huge.

The deficit in goods widened unexpectedly in June, as export volumes suffered their sharpest monthly fall in a year, though they rose 5.0 percent year on year in the second quarter.

On the output side, falling car production and a slide in construction bode poorly for future months after a more general slowdown in the first half of 2017.

As the economic picture has become cloudier, money market pricing for a rise in UK interest rates this year has collapsed and is the main driver of sterling selling since the start of August, analysts say.

"The pound is on the way down. It is drifting towards the lows from last month against the dollar," said Neil Mellor, a currency strategist with Bank of New York Mellon in London.

"The frame of mind is we don't like sterling and we will need a significant upturn in the data to change that."

By 0918, the pound traded 0.2 percent weaker on the day at $1.2980 while gaining around 0.1 percent to 90.27 pence per euro.

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