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LONDON, Dec 1 (Reuters) - Sterling slipped from a two-month high against the dollar on Friday, getting only a temporary boost from better-than-expected UK manufacturing data, as investors flagged concerns about Britain reaching a deal with the EU over the Irish border.
The pound had jumped on Thursday on a Times newspaper report that Britain and the European Union had reached agreement on a divorce bill and were close to agreement over the Northern Ireland border.
But not all investors are convinced that a deal can be easily reached over the Irish border, which will be the only land link between the EU and Britain after Brexit.
Sterling reached as high as $1.3550 in early trading in Asia, its strongest since Sept. 25, benefiting from broad dollar weakness and extending gains made on the previous day. But by 1000 GMT it had slipped to $1.3489, down 0.3 percent on the day, though still up more than 1 percent on the week.
"This week's sterling bounce on reports that the UK has accepted a higher financial divorce settlement with the EU seems based on the false assumption that the way is now clear for the European Council on 14-15 December to authorise moving on to the next phase of the Brexit process," said Christopher Granville, managing director at investment research firm TS Lombard.
"To get to that next stage (the transitional deal), however, two further agreements are required. One on citizens rights looks relatively easy. The same cannot be said of the other on the Irish border," he added.
A committee of lawmakers said on Friday that Britain's intention to avoid a hard border on the island of Ireland after Brexit is inconsistent with its plan to withdraw from the EU's single market and customs union.
Sterling got a brief boost on Friday as data showed British factories enjoyed their best month in more than four years in November, suggesting manufacturing will give a boost to the sluggish economy going into 2018.
The monthly survey of purchasing managers in the manufacturing sector (PMI) jumped to 58.2 from an upwardly revised 56.6 in October, topping all forecasts in a Reuters poll of economists.
"The overall impact on sterling (from the data) is very muted as investors are more focused on (Prime Minister) Theresa May's upcoming meeting with EU's Jean Claude Juncker," Think Markets analyst Naeem Aslam said, referring to May's meeting with the president of the European Commission on Monday.
"The agenda for May is to make her decision on the control points in Northern Ireland."
On a trade-weighted basis, sterling was trading near its highest levels in six months after a climb of around 1.5 percent this week - its best performance since mid-September.
Against the euro, sterling slipped 0.3 percent to 88.24 penced. (Reporting by Jemima Kelly; Additional reporting by William Schomberg; Editing by Saikat Chatterjee and Richard Balmforth)