Sterling hits three-month high ahead of manufacturing PMI

LONDON: Sterling kicked off the first trading day of 2018 by climbing to a three-month high against the dollar on Tuesday as the greenback weakened broadly, ahead of a survey of Britain's manufacturing sector.

The pound, which in 2017 recorded its best annual performance against the dollar since 2009, with an almost 10 percent rise, added to those gains on Tuesday. It climbed 0.4 percent to $1.3558, its strongest since Sept. 25.

Against a stronger euro, sterling was flat at 88.88 pence .

"We remain sterling bulls and continue to expect the pound to break above the $1.40 level," wrote MUFG currency strategists in a note to clients.

"As always, the course of Brexit negotiations will be important and developments in the coming weeks will be important given we expect a transition deal to be struck quickly," they added.

Brexit minister David Davis said on Tuesday that Britain wants to include financial services in a trade deal with the European Union which covers a full sweep of economic areas, and that any deal that left out the sector would be "cherry-picking".

A purchasing managers' index (PMI) for the manufacturing sector was expected to show activity slowing a touch to 58, still well above the 50-level that separates growth from contraction.