Sterling fell against the dollar on Friday after an official report pointed to a healthier-than-expected pace of job creation in the United States, helping the dollar recover from recent lows. US non-farm payroll figures in May, although not much higher than market expectations, helped the dollar rally as some in the market were bracing for a much worse reading given the spate of poor US data earlier in the week.
Sterling was down 0.4 percent on the day against the dollar at $1.5530, some way off Thursday's peak of $1.5685, which was its highest since mid-February. A reported options expiry at $1.5500 could keep the currency close to that level. Although the pound was still on track for its best weekly performance since October 2010 after its rapid gains against the faltering dollar this week, the dollar's rise after the non-farm payroll figures pushed the British currency lower on the day. "The big driver for the pound was payrolls ... the figures were good enough to show that the US recovery was on track," said Peter Frank, FX strategist at BBVA.
"That probably helped the market put back some of the dollar-longs that were removed in the previous few sessions." Earlier on Friday, the pound was trading near a four-month high against the dollar as markets positioned for a weaker non-farm payrolls reading which would have dampened speculation that the Federal Reserve might scale back monetary easing.
This contrasted with the Bank of England's decision to leave policy unchanged on Thursday, while recent upbeat British data has lowered the chances of more easing in coming months. Money-printing programmes, such as those by the Fed and BoE, tend to be seen as negative for a currency. Strategists said sterling's gains proved fleeting as sellers emerged on rallies. In the longer term the US economy would likely outpace the British economy and this could take sterling close to or even below the $1.40 mark by the end of the year. Against the pound, the euro was up 0.2 percent 85.05 pence, inching away from a two-week trough of 84.80 pence hit on Thursday.
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