Pound pushes higher on sales data, Irish minister's Brexit tone

* Strong January retail sales support sterling

* But Brexit uncertainty leads to third week of losses

* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

* Graphic: Trade-weighted sterling since Brexit vote http://tmsnrt.rs/2hwV9Hv (Adds details on latest move higher, Ireland FM comments)

By Saikat Chatterjee

LONDON, Feb 15 (Reuters) - The pound rallied in late European trade on Friday, helped by reports of some hedge fund buying, a conciliatory tone on Brexit from the Irish foreign minister and strong British retail sales published earlier in the day.

The move up to the day's high against both dollar and euro, came in the face of Thursday's Brexit vote defeat in parliament for Prime Minister Theresa May.

Sterling jumped half a percent to as high as $1.2860 versus the dollar, while against a broadly weaker euro the pound added 0.7 percent to reach 87.62 pence.

Analysts said that while sterling's earlier strength owed itself to the decent January retail sales numbers, the later move upwards may be because of thin liquidity in late Friday trading and some hedge fund purchases of the pound.

The Irish foreign minister also told Reuters that despite May's latest parliamentary loss, European Union states still stand willing to offer a package to help her get a Brexit withdrawal deal over the line.

On a weekly basis, the British currency remains set for its third consecutive drop.

With less than six weeks before the March 29 exit date, May has stepped up efforts to convince the European Union to grant her concessions.

"The constant Brexit can-kicking has also increased the risks of a disorderly exit," strategists at BNP Paribas said in a daily note.

May has promised that if parliament has not approved a deal by Feb. 26, she will make a statement updating lawmakers on her progress on that day and lawmakers will have an opportunity on Feb. 27 to debate and vote on the way forward.

For a factbox on what happens next, see

Sterling 's large Friday gains against the single currency came as the euro fell across the board after a European Central Bank board member said policymakers were discussing whether to issue new multi-year cheap loans to banks.

RATE HIKE BETS FALL

Dwindling expectations that the Bank of England will raise interest rates this year have weighed on the pound in recent days. Swap markets indicate a 28 percent probability rates will rise, compared with 30 percent earlier this week.

Derivatives markets painted a slightly more cautious picture for the pound, with one-month implied volatility picking up from December lows and rising to 9 vol on Friday.

Risk reversals, a market gauge of the ratio of puts to calls on a currency, indicate investors are leaning towards buying options to protect themselves against further downside in the British currency. (Reporting by Saikat Chatterjee Additional reporting by Tommy Wilkes Editing by Larry King and Andrew Heavens)

First Published: 2019-02-15 17:25:33
Updated 2019-02-15 18:56:10


© 2019 Thomson Reuters. All rights reserved. Reuters content is the intellectual property of Thomson Reuters or its third party content providers. Any copying, republication or redistribution of Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters. Thomson Reuters shall not be liable for any errors or delays in content, or for any actions taken in reliance thereon. "Reuters" and the Reuters Logo are trademarks of Thomson Reuters and its affiliated companies.