Sterling hit a fresh 2-1/2-year low against the dollar on Friday after strong US jobs numbers boosted faith that the US economy is recovering, taking its currency with it. The pound, meanwhile, is being hit by concerns that Britain may enter its third recession in four years and that the Bank of England is about to print more money as a stimulus.
Sterling is likely to suffer in coming days, traders said. US non-farm payrolls surged by 236,000 last month, beating economists' forecasts by almost half and pushing the jobless rate down to 7.7 percent - the lowest since December 2008. "The move we saw (in sterling/dollar) post-payrolls is more a question of dollar strength on the back of the stronger number," said Christian Lawrence, currency analyst at Rabobank.
Sterling was down 0.5 percent on the day against the dollar at $1.4950, having fallen to $1.4886, its lowest since mid-2010. It was around $1.5030 before the US data was released. Its losses against the dollar dragged sterling's trade-weighted index to 78.3, close to a 20-month low of 78.1 struck on February 25. The pound has been one of the worst performing major currencies in 2013, falling around 8 percent against the dollar and around 6.5 percent against the euro.
The spreads between two-year US government bonds yields and their British counterparts have moved in favour of the US, reflecting dollar demand. The euro was down 0.5 percent against sterling at 86.88 pence. Earlier, Middle eastern investors were the main buyers of the pound. One-month implied volatility for sterling/dollar rose to 8.2 percent after the US jobs data from around 7.9 percent on Thursday, signalling the pair is likely to see some sharp swings in the coming weeks.
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