Sterling slips back below $1.31 as Brexit talks begin

STERLING slipped back below $1.31 on Monday after soaring to its highest levels in 10 months at the end of last week on a broad dollar sell-off.

Traders were cautious as four days of Brexit negotiations began in Brussels.

The pound jumped almost 2 cents on Friday to hit $1.3113 <GBP=D3, its strongest since last September, after U.S. inflation and retail sales data came in weaker than expected, putting into doubt the prospect of a further rate hike from the Federal Reserve this year.

But sterling started the week by edging down from those highs, trading down 0.1 percent on the day at $1.3089 and flat against the euro at 87.50 pence, still close to a three-week peak hit on Friday.

Brexit Secretary David Davis, in the Belgian capital for talks with the European Union's chief negotiator Michel Barnier a month after a first meeting, said on Monday that having "made a good start" during their last encounter, "this week we'll be getting into the real substance".

With less than two years to settle divorce terms before Britain leaves, deal or no deal, on March 30, 2019, the 27 other EU national leaders want British Prime Minister Theresa May to rally her divided nation swiftly behind a clear, detailed plan that can minimise economic and social disruption across Europe.

Investors will be watching the talks closely, with any signs that Britain will lose preferential access to Europe's single market likely to weigh on the currency.