FX round-up: Sterling pulled down by UK PMI disappointment and more Brexit unease

Sterling took a dive on key currencies, except South Africa's besieged rand, as disappointing UK manufacturing data dented confidence in the British unit against a backdrop of still more Brexit nerves.

At about 17:10 GMT, sterling was down 0.55% to $1.2481, and down 0.58% to €1.1710. The dollar-spot index, however, was up 0.23% to 100.580.

"Threat of a diplomatic spat between UK and Spain over the post-Brexit future of Gibraltar damaged sentiment towards the pound," said Jasper Lawler of London Capital Group.

Another factor, he said, was the EU figuratively binning Prime Minister Theresa May's Article 50 letter over her demand for tandem trade and exit talks.

And then there was the UK's purchasing-managers' index, down to 54.2 in March after a revised reading of 54.5 for February. This disappointed forecasters looking for 54.6.

Lukman Otunuga, research analyst at FXTM, characterised the cable as erratic, volatile and range bound since the official invocation of Article 50 last week. He said resistance was at about $1.2570, with support at about $1.2370.

"Now that the European Union has shared the draft guidelines on the future of the UK relationship after Brexit, investors are now waiting for the next key steps."

"With uncertainty still a certainty when dealing with Brexit, sterling may be exposed to further downside shocks. If bears manage to drag the GBPUSD back below $1.2370, a decline towards $1.2200 remains a live possibility," said Otunuga.

Sterling was flat against the loonie, but down against the aussie, kiwi and yen. It was up 1.51% to 17.0979 rand, while the dollar was up 2.15% to 13.7017 rand.

South Africa's new finance minister, Malusi Gigaba, has criticised the economic management of the country in his first days since taking up the office.

He has already spoken of the need for a radical transformation in how the country's economy operates.

On Monday, ratings agency Standard & Poor's cut South Africa long-term foreign currency rating to 'BB+' with a negative outlook due to political and institutional uncertainty.

Across the Atlantic Ocean, the dollar was down against the euro and yen, but up on the aussie, loonie and kiwi crosses.

Markets were already looking ahead to the Federal Open Market Committee meeting minutes and various jobs data including the closely watched non-farm payrolls numbers out later this week.

"Anecdotally, traders appear to be waiting for FOMC minutes and the US unemployment report to test the conviction of Fed members signalling 3-4 hikes this year," said Lawler.

On the US data front, the Institute for Supply Management's manufacturing sector gauge slipped to 57.2 in March, from 57.4 in February. Economists had projected a reading of 57.0.