Pound steady, dismisses Brexit talk and positive data

By Ritvik Carvalho

LONDON (Reuters) - Sterling held below seven-month highs versus the dollar on Wednesday, largely brushing off positive construction data and an initial round of posturing by Britain and the European Union over Brexit negotiations.

A better-than-expected construction PMI showing growth in Britain's construction industry touching a four-month high in April failed to have an impact on sterling compared with Tuesday's manufacturing data, which had given the pound a boost.

The pound barely budged after the numbers, trading close to levels seen before the data. Sterling was 0.2 percent lower at $1.2910, not far off a seven-month high of $1.2965 hit on the last trading day of April.

"The problem with the construction PMI is it's always the little brother of the three (monthly PMI surveys) in terms of its importance to the UK economy," said Christopher Beauchamp, market analyst at IG Markets.

The most closely watched of the surveys -- covering the services sector, which accounts for nearly 80 percent of Britain's economic output -- is due on Thursday.

Sterling largely brushed off headlines over the size of Britain's EU exit bill, along with suggestions from both sides that negotiations to exit the bloc would be difficult.

Brexit minister David Davis said on Wednesday that Britain would not pay 100 billion euros to leave the European Union, after the Financial Times reported that the bloc was preparing to demand that amount.

This came a day after British Prime Minister Theresa May promised EU officials she would be "a bloody difficult woman" in the talks, after being accused of underestimating the complexity of Brexit negotiations and having "illusions" over a deal.

The pound briefly dipped about 40 ticks during a speech by May on Wednesday afternoon in which she accused European politicians and officials of seeking to affect the outcome of the June 8 national election by issuing threats over Brexit.

But it recovered soon after, steadying to levels seen earlier in the day.

"The markets haven't really shown too much caution on this because it's still very much sort of empty rhetoric. There's no actual negotiations begun," said David Cheetham, chief markets analyst at XTB.

"I think there's a kind of concept within the market that both sides are kind of overstating their hand a little bit in order to get a strong opening position in the negotiations. But this will actually have little impact once the negotiations begin in earnest."

The pound was 0.1 percent lower at 84.55 pence per euro.

(Editing by Catherine Evans and Ed Osmond)