LONDON: Sterling held below seven-month highs versus the dollar on Wednesday, as a volley of headlines suggesting talks on Britain's exit from the European Union could be difficult outweighed the impact of forecast-beating construction data.
Growth in Britain's construction industry accelerated to a four-month high in April according to the Markit/CIPS UK Construction Purchasing Managers' Index (PMI), which rose to 53.1 from 52.2 in March, against forecasts in a Reuters poll of economists for a slight fall.
The pound barely budged after the numbers, trading close to levels seen before the data. Sterling was 0.2 percent lower at $1.2910, not far off a seven-month high of $1.2965 hit on the last trading day of April.
"The problem with the construction PMI is it's always the little brother of the three (monthly PMI surveys) in terms of its importance to the UK economy," said Christopher Beauchamp, market analyst at IG Markets.
"Because you had this big number yesterday and a nice improvement on that front, it does sort of make it hard for the pound to really continue to gain."
A stronger-than-expected manufacturing PMI gave sterling a lift on Tuesday. The most closely watched of the surveys -- covering the services sector, which accounts for nearly 80 percent of Britain's economic output -- is due on Thursday.
Earlier, headlines on the size of Britain's EU exit bill and the likelihood that negotiations to exit the bloc would be difficult weighed on sterling.
Brexit minister David Davis said on Wednesday that Britain would not pay 100 billion euros to leave the European Union, after the Financial Times reported that the bloc was preparing to demand that amount.
This came a day after British Prime Minister Theresa May promised EU officials she would be "a bloody difficult woman" in the talks, after being accused of underestimating the complexity of Brexit negotiations and having "illusions" over a deal.
"In our view, no side entering into protracted, difficult negotiations will open up by suggesting that the other side is being utterly reasonable and all of their demands will be met with acquiescence," Nomura strategists wrote in a note.
"The pound looks to be following suit and has had limited drawdowns thus far, adding conviction to our view that the political Brexit timeline may provide 'flashpoints' as today's news suggests, but the market seems to be taking them on the chin and they are largely priced in."
The pound was less than 0.1 percent lower at 84.50 pence per euro.
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