LONDON: The pound rose versus a broadly weaker dollar on Friday, but headed for its third weekly decline in a row after a week marked by gilt market turbulence amid growing investor jitters over Britain’s finances.
At 1040 GMT on Friday, sterling was 0.3 percent higher at $1.3481, but on track for a weekly decline of 0.2 percent. The pound was flat against the euro, which held at 86.73 pence.
The dollar was weaker across the board as traders await key US payrolls data due later which are expected to firm up the case for an interest rate cut by the Federal Reserve.
Sterling has been in focus this week, after British government bonds, known as gilts, sunk amid a broader bond market sell-off as focus shifted to rising debt levels in major economies.
Yields on 30-year British government bonds, or gilts, briefly shot up this week to their highest since 1998.
This week the date for the next UK budget was set for November 26, with finance minister Rachel Reeves under pressure to keep the government’s finances on track.
In a note, Ruth Gregory, deputy chief UK economist at Capital Economics said many of the conditions which have led to fiscal crises in the past are now in place in the UK, but that this does not mean a fiscal crisis in the UK is imminent or inevitable.
“The missing ingredient is a trigger. If a UK fiscal crisis does erupt, it’s as likely to come from a change in perceptions or personnel as economic data or policy,” she wrote.
“This underlines the need for the government to continue to commit to fiscal discipline to keep the bond market onside.”
Official figures on Friday showed British retail sales volumes rose by a higher-than-expected 0.6 percent in July, leaving them up 1.1 percent on the year.
Economists polled by Reuters had forecast a 0.2 percent monthly rise in sales volumes and a 1.3 percent increase compared with a year earlier.
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