LONDON: Sterling headed for the bottom of its recent range against the dollar on Friday, hurt by a bullish week for the US currency and a couple of marginally weaker than expected numbers on the British economy.
The dollar index, measuring its strength against a basket of currencies, rose to a five-week high in early trade, helped by growing speculation of the potential for easier monetary policy in both Japan and Europe.
There is no such outlook on the pound, with the Bank of England's next move expected to be a rise in interest rates next year.
But after a 10-percent gain since mid-2013, sterling looks increasingly stretched, particularly against the dollar.
All three of the closely watched UK PMI survey of industry purchasing managers dipped below forecasts this week, although all are still indicative of an economy growing strongly. The pound has been stuck in a range between roughly $1.6480 and $1.6820 since the middle of February.
It inched down 0.1 percent to $1.6584 on Friday, but was holding firm against the euro.
"The data yesterday was very slightly negative, and I would stress very slightly, and that has prodded us lower," Steven Saywell, BNP Paribas head of global FX strategy, said. "Overall we're quite constructive on sterling although the path against the dollar is a bit less clear. Against the euro from a valuation perspective the pound is still heavily undervalued."
He said BNP's models showed fair value for sterling was around 76 per euro.
It traded 0.04 percent higher at 82.59 pence on Friday.
"There's still a long way sterling can go given the prospects for strong UK growth and disinflation in the euro zone," Saywell said. Swedish bank SEB said technical analysis, one way of assessing the outlook for currencies, indicated that 1.6620 was now a point of resistance for any rebound higher.
It saw support for sterling at $1.6460.
But the day's trade was set to hang on US non-farm payrolls data, traditionally the biggest number of the month worldwide and this time round a potential trigger for a broader surge higher for the dollar predicted by many banks this year.
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