Sterling rebounded against the dollar on Friday, after much weaker than forecast US jobs data drove investors who had added bullish bets on the greenback in expectation of a strong number to unwind those positions. Sterling rose to a session high of $1.6078, reversing earlier losses, with investors now targeting the July 6 high of $1.6090. The short covering also helped the pound advance against the euro, with the common currency last down 1 percent at 88.94 pence.
"Investors had gone into the payrolls data rather short on sterling, and those positions were unwound," said Adrian Schmidt, FX strategist at Lloyds TSB Financial Markets. US data showed employment growth ground to a halt in June, with employers hiring the fewest number of workers in nine months, dashing expectations the economy would regain momentum in the second half of the year. Analysts expect investors to sell into sterling's latest rally, although near-term support remained robust around Friday's low of $1.5930 with traders citing bids from Asian central banks and corporate buyers.
Earlier, the pound barely reacted to data showing Britain's construction industry struggling to grow in May and an unexpectedly strong rise in UK factory gate inflation, which climbed to its highest level since October 2008. While the dollar sold off broadly after the jobs numbers, the euro failed to get much of a lift. The euro was down 0.3 percent against the dollar at $1.4320, with investors wary about the single currency amid lingering concerns about debt contagion.
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