LONDON (Reuters) - Sterling rose on Friday after suffering heavy losses spurred by fears of a global economic slowdown, but uncertainty about Brexit kept its gains in check.
The pound sank to its lowest since April 2017 on Thursday after worries about the health of the global economy and particularly China sparked an investor exodus from currencies considered riskier.
But the currency staged a modest recovery on Friday, rising 0.3 percent against the dollar to $1.2670
(World FX rates in 2018 http://tmsnrt.rs/2egbfVh)
Versus the euro, it rose 0.2 percent to 90 pence. (EURGBP=D3)
Investors are awaiting a PMI survey for Britain's much larger services sector due out at 0930 GMT.
The Services Purchasing Managers' Index is forecast to come in at 50.7 for December, a small bounce after a precipitous fall in November.
"Our modestly above consensus forecast for UK PMI Services is unlikely to help GBP much today. Sterling is currently chiefly driven by Brexit uncertainty," said ING FX strategist Petr Krpata.
(Trade-weighted sterling since Brexit vote http://tmsnrt.rs/2hwV9Hv)
Reduced expectations for a Bank of England interest rate rise in 2019 are also weighing on the pound, as are concerns about whether British Prime Minister Theresa May can convince lawmakers to back her Brexit withdrawal arrangement before a scheduled departure date in March.
A parliamentary debate on May's deal with Brussels kicks off next week, with a vote scheduled for the week of Jan. 14.