LONDON: Sterling headed towards 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.
There was a brief flurry of activity after US jobs numbers that had been seen as a potential trigger for a surge higher for the dollar. But by late afternoon in London the pound was trading roughly where it had for most of the European day, down 0.15 percent compared with the previous US close.
The dollar index, measuring the US currency's strength against a basket of currencies, was trading close to a five-week high, 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.
"(US) payrolls are roughly as expected and have taken us no further, but we believe sterling will come under some pressure against the dollar," said Paul Robson, a currency strategist with RBS in London.
All three of the closely watched UK surveys of purchasing managers dipped below forecasts this week, although all are still indicative of an economy growing strongly.
"The striking thing about the PMI numbers is how steadily they have slowed since September," Robson said. "If we get another couple of months there will be people beginning to push back expectations on the first rise in rates." Money markets currently show investors pricing in a rise in British official interest rates sometime in the first half of next year, but Robson's call is not until August.
Broadly, that sort of view on rates reflects doubts over the structure of Britain's economic recovery, so far largely based on consumer credit and rises in housing prices in a handful of markets.
That has halted the pound's 10-percent surge since the middle of last year. The currency has been stuck in a range between roughly $1.6480 and $1.6820 since the middle of February.
It inched down to $1.6569 on Friday, but was holding firm against the euro.
British government bonds rallied in line with their US counterparts after the US jobs data.
British gilt futures were up 69 ticks on the day at a one-week high of 110.04.
Ten-year yields were 7 basis points lower at 2.69 percent.
Marc Ostwald at Monument Securities, said investors had been bracing for stronger US figures.
"There is simply no pressure on the Fed," he said, referring to the US central bank's planned phasing-out of its bond-buying programme.
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