Sterling rose to near eight-month highs against the dollar on Friday as a sell-off in the US dollar picked up after weak US payrolls backed market views that the Federal Reserve would ease monetary policy further. It also made gains against the euro, reversing losses after Eurogroup Chairman Jean-Claude Juncker said the euro was too strong.
"The weak US numbers saw the yen, euro and sterling all rise against the dollar," said Mark Oswald, FX and rates strategist at Monument Securities. By 1512 GMT, the pound recovered from early losses against the dollar to trade at $1.5940, up 0.4 percent for the day. It had earlier slipped to a low of $1.5824, having hit an eight-month high on Thursday at $1.6019.
The pound was also helped by above-forecast UK producer price data which somewhat reduced expectations the Bank of England will need to pump more cash in the near term. "At the margin, the producer price data make the (Bank of England Monetary Policy Committee) more reluctant to revive quantitative easing in the near term at least, although the key factor on this will be just how much growth slows," said Howard Archer, Chief European Economist at IHS Global Insight.
Sterling also pared losses versus the euro on the UK data after earlier matching a five-month low of 88.05 pence. The euro traded 0.34 percent lower at 87.38 pence by Friday evening. The euro ran some selling after Juncker said he was not happy with the euro's rise to $1.40 against the US dollar. Despite Friday's losses the outlook for euro/sterling was favourable.