Glaxosmithkline Share News (GSK)

By Saikat Chatterjee and Tom Finn

LONDON, March 27 (Reuters) - Sterling fell nearly 1 percenton Tuesday and is on track to post its biggest daily loss in amonth as expectations of selling pressure from a large corporatehealthcare deal prompted investors to take profits after arecent rally.

The British currency enjoyed a strong last week afterBritain secured a Brexit transition deal with the EuropeanUnion, official data showed British workers' wages growing attheir fastest rate in nearly 2-1/2 years and the BoE confirmedits hawkish tilt.

Such has been the bullishness around the short-term outlookfor sterling that the British currency was trading near Brexitreferendum vote highs against most of its rivals, including theSwiss franc

But news that GlaxoSmithKline will buy Novartis's36.5 percent stake in their consumer healthcare jointventure for $13 billion in cash triggered an unwinding of longsterling bets against its rivals built up after Britain clinchedthe transition deal last week.

Sterling's fall against the franc rippled over into thebroader market complex with the pound falling 1 percent againstthe dollar and 0.5 percent against the euroas investors took profits before the typically volatile quarterend period.

"We have seen sterling come a long way over the last week so

the deal may well have been the triggerfor some profit taking," said Jane Foley, FX strategist atRabobank in London.

The British currency was down 0.5 percent against the Swissfranc at 1.3361 francs, its biggest drop since Feb. 8,according to Thomson Reuters data.

Against the dollar, sterling plunged nearly apercent but is still up more than 4 percent so far this year asinvestors snapped up the pound citing its undervaluationrelative to other currencies.

QUARTER-END FLOWS

Foley said a fall in the pound could also have been causedby quarterly flows as global asset and fund managers rebalancetheir portfolios, a move that can distort markets.

"There is a fair amount of sterling that has to be soldagainst the Swiss franc and we are at post-Brexit referendumvote highs," said John Marley, head of FX strategy at InfinityInternational, a currency risk management firm.

On a trade-weighted basket basis, the poundwas trading at two-month highs above 80.

A revival in risk appetite in the broader markets alsounderpinned sterling's gains in the previous session.

Global markets were shaken this month after U.S. PresidentDonald Trump moved to impose tariffs on Chinese goods andBeijing threatened similar measures, though headlines over thelast 24 hours suggested that tensions were receding.

Derivative markets were signalling bullishness for sterlingin the short term with three-month risk reversals for theBritish currency - a ratio of calls to puts --trading at their highest level in more than a month.

"While the attraction of the euro in part reflects itsstructural large current account surplus, the pound isbenefiting more from expectations of positive cyclicaldevelopments," MUFG strategists wrote in a daily note.

(Editing by Mark Heinrich)