UK Markets closed

Sterling steady as hopes of Tory election win overshadows weak data

By Olga Cotaga

* Graphic: World FX rates in 2019

* Graphic: Trade-weighted sterling since Brexit vote

By Olga Cotaga

LONDON, Nov 13 (Reuters) - The pound was slightly weaker against the U.S. dollar on Wednesday and stable against the euro, as weak economic data, which should hurt sterling, is more than offset by supportive political developments in Britain.

Average weekly earnings rose at a weaker pace in the three months to September in the UK, but the pound continues to derive support from Monday's news that the Brexit Party will not contest the seats the Conservative Party won in 2017 at the general election next month.

The move increased the chance that Boris Johnson will stay as prime minister and implement his deal to take Britain out of the European Union.

Optimism was further fuelled by a YouGov poll released on Tuesday showing Johnson's Tories had a 14-point lead over the opposition Labour Party.

"The pound is likely to remain well supported as long as the political news-flow pointing to a Tory majority continues," said Derek Halpenny, head of research at MUFG, but added that "the upside is limited."

"There is a price to pay for these gains – a promised short transition period that will weigh on sentiment and with the economy set to weaken further as household spending weakens, pound gains will be contained."

Sterling was last down marginally at $1.2834. Against the euro, the pound was flat at 85.72 pence.

Traders will be watching UK inflation data released at 0930 GMT. Economists polled by Reuters expect the consumer price index to fall to 1.6% in October year-on-year from 1.7% in September. (Reporting by Olga Cotaga; Editing by Toby Chopra)