Sterling hit a four-month high against a weak dollar on Friday after US government jobs data disappointed the market and bolstered speculation that the Federal Reserve will ease monetary policy. But the pound dropped to its lowest in two months against the euro as confidence in the single currency revived after the European Central Bank unveiled a plan to bring down the borrowing costs of struggling peripheral euro zone countries.
The euro zone is the UK's biggest trading partner and any easing of the debt crisis is seen as positive for sterling, especially against the dollar. ECB President Mario Draghi announced on Thursday that the bank would undertake unlimited, short-dated bond purchases under strict conditions to ease funding pressures on governments that sought help. The pound rose to a four-month high of $1.6010, rising past option barriers at $1.6000 and rallying in line with the euro after the US data. It was also bolstered after Spanish 10-year borrowing costs fell below 6 percent for the first time since May.
"The more the dollar weakens, the more chances sterling/dollar will remain above $1.60," said John Hardy, currency strategist at Saxo Bank. "The unemployment numbers have weighed down on the dollar and given a lift to stocks and risk." The pound edged lower against a broadly stronger euro, with the shared currency up 0.6 percent on the day at 79.74 pence. The euro rose to 79.94 pence, its highest level since early July. Traders said a decisive break of its 100-day moving average of 79.77 could see it rise to 80 pence in the near term.
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