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Sterling wallows near 6-week low vs US dollar

[LONDON] Gains for the US dollar pushed sterling back towards lows from early July on Tuesday, the British currency weighed down by an uncertain economic outlook that has quashed expectations of a rise in Bank of England interest rates.

The pound has fallen more than 3 per cent since the start of August, driven by a perceived change in tack at the Bank's latest policy meeting and a broader recovery for the US currency.

Fears over Brexit negotiations, and how much the two-year process may hamper already slowing growth, have fed into a bleak mood and sterling is also at a more than 10-month low against the euro.

In trade-weighted terms, the currency is just over 1 per cent off a record low hit in October's short-lived "flash crash".

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Public finance data showing the first July budget surplus since 2002 failed to lift the gloom.

"Not much of a reaction to that," said a trader at one London-based brokerage. "We may see some more interest around the CBI numbers later." Business lobby the Confederation of British Industry is due to publish its industrial orders data at 1000 GMT.

By 0839, the pound was down a third of a per cent on the day at US$1.2854, compared to last week's low of US$1.2832. It traded flat at 91.58 pence per euro.

Credit Agricole strategists also pointed to upward revisions in the UK consumers' savings rate published by the ONS as a sign that UK households are still holding up well in the face of falling real incomes.

"While these developments should be seen as positive for GBP, it remains to be seen whether the data in isolation could usher in a period of consolidation for the beleaguered pound," they said.