Sterling dips

Sterling inched lower on Friday, with analysts already looking to a survey of labour data next week to help the market decide how strong Britain's economic recovery really is. Doubts over the pound's bullish run since the middle of last year have emerged this month, with many analysts saying the prospect of a rise in interest rates next year is now firmly priced in.
BoE officials have also shown signs of concern over the currency's strength and Governor Mark Carney's testimony in parliament earlier this week underlined for some his doubts over the amount of slack remaining in the economy. Some analysts argue that Britain's recovery remains largely the product of consumer borrowing and a new bubble of house prices in some areas, particularly London, rather than any broader upturn in demand, investment and purchasing power.
If wages, which have continued to fall in real terms despite a pickup in employment, were to start rising more robustly that would address much of that concern. "Some of the surveys I have seen on payrolls and pay awards in the past month or two have all been pointing to growing strength," said James Knightley, strategist with Dutch bank ING in London.
"Business surveys show intentions for hiring at record levels and we may see a pretty sharp pick up in employment which will put more bargaining power in the hands of workers. That all plays in to pressure on the BoE to act. We are pretty optimistic on the pound going forward." Sterling was down less than 0.1 percent at $1.6618 and around 0.2 percent lower against the euro at 83.58 pence in morning trade in Europe.
Unemployment numbers are due in the middle of next week and are expected to show another 25,000 dip in the number of people registered as out of work, reducing the jobless rate to 7.1 percent - less than half or a third of that of some European peers. Wages are expected to have risen 1.2 percent year on year in the three months to January, only a touch higher than a month earlier and compared with inflation of 1.9 percent.
There was a minimal blip lower for sterling on the back of a larger-than-expected trade gap, published on Friday, and the currency is near the bottom of a range it has held in since early February. "Part of the higher trade gap is due to sizeable upward revision of the trade deficit in December," Citigroup analysts said in a note after the data.