LONDON: Sterling fell on Monday against a dollar buoyed by signs of a recovery in the US jobs market, although traders said the pound's losses were likely to be limited by improving UK data.
British economic activity has picked up, reducing expectations that the Bank of England will adopt more aggressive monetary easing when Mark Carney takes over as governor from next month.
Sterling was down 0.3 percent on the day against the dollar at $1.5510, some way off Thursday's 3-1/2 month peak of $1.5685. Option expiries at $1.55 are likely to keep the pair pinned around that level.
The euro was up 0.15 percent at 85.05 pence.
US non-farm payroll figures for May, although not much higher than market expectations, helped the dollar rally as some in the market were bracing for a much worse reading given a recent spate of poor US data.
"We are looking for a much steadier dollar this week," said Simon Smith, chief economist at FXPro. "That should keep sterling below its high above $1.5600 but I do not think it will fall below $1.5400 as UK data has surprised on the upside."
This week UK industrial data and a jobs report for April will provide clues on how durable the UK recovery is.
While slightly better British economic data last week pointed to modest growth and eased concerns that incoming Bank of England governor Carney might opt for extra stimulus, analysts said sterling could be weighed down by prospects of more easing later in the year if the recovery flagged.
"The key risk to sterling remains whether Carney aims to push through new changes in the conduct of monetary policy," said Monsoor Mohiuddin, chief currency strategist at UBS.
Chancellor George Osborne has tasked the bank under its new governor to come up with forward guidance that will enable monetary policy to support the government's economic objectives.
The monetary policy committee is expected to announce changes by August. It is thought likely to pledge to keep policy accommodative for a long time, like the US Federal Reserve, to ensure an economic recovery.
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