LONDON: Sterling fell versus the dollar and pulled away from a 10-month high against the euro on Friday after weak UK trade data and as investors awaited a US jobs report that could boost the dollar if it is strong.
The pound was down 0.1 percent at $1.6079 after figures showed the UK trade deficit unexpected widened to 9.816 billion pounds, its biggest shortfall since October 2012.
It could drop further if US payrolls figures, due at 1330 GMT, increase expectations that the Federal Reserve will start scaling back its monetary stimulus.
They are expected to show the economy created 125,000 jobs in October.
The euro was up 0.1 percent at 83.44 pence, off Thursday's low of 83.00 pence, its weakest since mid-January hit after the European Central Bank unexpectedly cut interest rates.
Traders said in the immediate term sterling may struggle to make a sustained break above 1.20 euros, which equates to 83.33 pence per euro, a level at which UK importers often look to sell the pound. But the pound was expected to push higher in coming days after the ECB's move dropped euro zone borrowing costs to 0.25 percent, below Britain's 0.5 percent.
"Overall I'd expect a positive sterling bias going in to next week's BoE Inflation Report. But we may see a squeeze to the upside before we resume lower," said Richard Wiltshire, chief FX Broker at ETX Capital.
"Euro/sterling will be sold but I think we won't see concerted sellers appear until we retest 83.50/60, maybe even 84.00."
The BoE presents growth and inflation forecasts next Wednesday. After recent strong UK data, expectations are growing in the market that the BoE may bring forward its forecast for when the unemployment rate will hit 7 percent, the level at which it would consider raising interest rates.
It has said it does not expect this to happen until well into 2016. The BoE left its key interest rate unchanged on Thursday, but investors increasingly expect it to tighten policy earlier than it has flagged.
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