Pound holds above $1.27, buoyed by dollar weakness

LONDON (Reuters) - The British pound rose on Friday as the dollar fell across the board and some traders saw an opportunity to buy sterling after data this week pointed to an UK economy holding up relatively well.

Ongoing worries about whether Britain can agree a trade deal with the European Union over the coming months to avoid a sudden and disorderly exit from the bloc continue to keep most investors cautious about any sustained sterling strength.

The pound this week suffered its longest losing streak against the dollar since the height of the financial crisis in 2008, hitting a near 14-month low of $1.2662 on Wednesday, but has since bounced three quarters of a cents higher.

Retail sales data on Thursday showed that the British economy, while far from booming, has some momentum.

British shoppers spent more than expected in July, pointing to a solid start to the third quarter for the economy, although data published earlier in the week showed a disappointing rise in worker wages that has underlined the squeeze on consumers.

“The pound has had a disappointing week despite a raft of data that points to an economy that while not firing on all cylinders is by no means the worst in the G7. Once again it’s been politics that has been weighing on the currency with the increasing talk of a “no deal” Brexit keeping traders on the sidelines,” CMC Markets analyst Michael Hewson.

Sterling rose 0.2 percent to $1.2732, near its day’s high of $1.2749.

Against the euro the pound struggled, losing 0.2 percent to 89.645 pence but still below recent lows of more than 90 pence per euro.

With most UK economic data published this month out of the way, the focus will shift back to Brexit as Britain heads towards several months of crucial negotiations and several EU leaders summits.

Jeremy Hunt, the British foreign minister, warned on Wednesday that the short-term market impact if Britain leaves the EU without a deal would be significant.

Graphic: World FX rates in 2018 tmsnrt.rs/2egbfVh

Graphic: Trade-weighted sterling since Brexit vote tmsnrt.rs/2hwV9Hv

Reporting by Tommy Reggiori Wilkes; Editing by Keith Weir