Sterling steadies near $1.29 as data shows UK economy losing steam

LONDON: Struggling sterling steadied just above $1.29 on Tuesday, with weaker-than-expected numbers from Britain's dominant services industry adding to a downbeat run of data that has seen the pound lose almost 3 percent versus the dollar in the past month.

The monthly Purchasing Managers' Index (PMI) survey for the services sector showed growth at its weakest in almost a year, as worries over Britain's exit from the European Union and the hit that could have on investment and the broader economy mounted.

The index fell to 53.2 in August - still above the 50 mark that separates growth from contraction but lagging forecasts for a reading of 53.5.

The pound briefly dipped after the numbers, hitting the day's low of $1.2908, before recovering to trade at $1.2925 by 0842 GMT.

Against the euro, it was up 0.1 percent at 91.96 pence , just over a penny away from an 11-month low hit last week.

"The services PMI data has shown that the UK's economy is losing steam, and this means that the Bank of England (will) have to continue its support," said Think Markets analyst Naeem Aslam, referring to the BoE's loose monetary policy that includes record low interest rates.

The BoE will meet next week to discuss policy.

The services data followed numbers from the construction sector the previous day that showed growth at a one-year low.

Britain's economy initially withstood the shock of the Brexit vote in June last year, but it slowed sharply in early 2017, as rising inflation - caused in large part by the pound's steep falls following the vote - and weak wage growth ate into spending by households.

Sterling has fallen around 14 percent against the dollar since the EU referendum, and around 17 percent versus the euro.

Most strategists say the pound will remain close to these levels while there is still so much uncertainty over any exit deal with the EU.

Prime Minister Theresa May warned lawmakers over the weekend that Britain could be faced with a Brexit "cliff edge" if they failed to back her EU repeal bill, which is to be debated in parliament on Thursday.

"Heightened Brexit uncertainty continues to cloud the economic outlook," wrote MUFG strategists in a note to clients.

"Given that wage growth has shown little signs of firming, and that the latest investment prints for Q2 were stagnant in both quarterly and yearly terms, we doubt that any rate hike is looming."