August 24, 2017 / 8:22 AM / 10 months ago

Sterling falls to new 2-month lows as outlook worsens

* Graphic: sterling and gilt yields

* Graphic: World FX rates in 2017

* Graphic: Trade-weighted sterling since Brexit vote

By Saikat Chatterjee

LONDON, Aug 24 (Reuters) - Sterling fell to a new two-month low against the dollar on Thursday as the lack of any major economic data encouraged investors to add bets against the British currency.

“We have been quite bearish about the British pound for some time and I think this trend is justified given its worsening fundamentals such as a widening current account deficit,” said Thu Lan Nguyen, a FX strategist at Commerzbank AG in Frankfurt.

Sterling was flat at $1.2774, its weakest since June 27. . On a monthly basis, it has fallen nearly 3 percent so far this month and is set for its biggest monthly decline since October 2016.

Against the euro it stabilised below near a 10-1/2 month low of 92.37 pence hit on Wednesday. Apart from that level reached during a short-lived overnight “flash crash” in October, that was its weakest in eight years.

The government is striving to move forward the formal discussions on leaving the European Union with a series of position papers that have outlined potential compromises over some of the issues likely to block progress this year.

Britain on Wednesday outlined several escape routes from the “direct jurisdiction” of the European Court of Justice after Brexit, one of Prime Minister Theresa May’s key aims in talks to unstitch 40 years of EU membership.

Morgan Stanley strategists said the British economy may lose growth momentum as the government’s failure to define its Brexit target creates investment uncertainty.

With only second-quarter U.K. GDP data revision out shortly, analysts are focused on how negotiations with the European Union progress in the coming days.

On a trade-weighted basis, sterling was trading at its lowest level since November 2016. (Reporting in Saikat Chatterjee; Editing by Angus MacSwan)

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