LONDON: Sterling fell half a percent to a 1-1/2 week low on Friday as a resurgent dollar and comments by President Donald Trump that a possible U.S.-British trade deal was probably dead sapped demand for the pound.
In early London trading, sterling fell to $1.3131, its lowest since July. 3.
Trump, who is visiting Britain, said Prime Minister Theresa May's newly-announced Brexit blueprint had probably killed hopes of a trade deal.
"Sterling looks to be still a buy on dips around 1.30 levels but with all this news on the political front, investors are wary of taking aggressive positions until some clarity emerges," said Georgette Boele, a senior FX strategist at ABN Amro Bank in Amsterdam.
Trump's comments follow a series of resignations from May's government over her strategy and also complaints from financial firms over its provisions for the sector after Britain leaves the European Union in March.
May's government outlined its proposals to retain the closest possible trade ties with the bloc, although there was one major shift -- the government abandoned plans for close ties for Britain's huge financial services industry.
Markets are concerned that the EU will demand more concessions from Britain before agreeing to a Brexit deal, spelling months of more political uncertainty.
Against the euro, the British currency weakened a quarter of a percent to 88.56 pence.
ING strategists said the much-awaited Brexit white paper published on Thursday hasn't quite solved the UK's future trading relationship, and markets will be waiting to see if the EU can work with latest proposals.
Such concerns will also dog investors who have been betting the Bank of England will raise interest rates as early as August, following some recent positive signs such as monthly economic growth data and upbeat comments from Governor Mark Carney.
"This short-term uncertainty will keep the Bank of England wedged between a rock and hard Brexit place," ING said in a daily client note. - Reuters
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