Sterling extended its losses against the dollar on Friday as the greenback jumped across the board on better-than-expected US jobs numbers, while weak UK industrial output data rekindled recession fears and weighed on the pound. But the pound outperformed the euro as investors' focus shifted to the struggles of other peripheral countries like Portugal after Greece sealed a debt swap with private sector creditors.
The troubles in the eurozone are likely to offer support to the pound especially against the euro. The dollar hit a 9-1/2 month high against the yen and jumped against the euro after US data showed employment in February grew solidly for a third straight month, a sign the recovery was broadening and in less need of further monetary stimulus.
Sterling was down 0.9 percent against the dollar at $1.5682, dropping from around $1.5792 before the US jobs numbers were released. The pound has chart support around its 55-day moving average at $1.5670. Earlier the pound had dropped against the dollar and pared gains against the euro after UK industrial output unexpectedly fell 0.4 percent in January, data showed. Economists had forecast a 0.3 percent rise. The euro was 0.4 percent lower against the pound at 83.51 pence. The common currency has gained for three straight sessions this week and is ripe for some profit taking, with a Swiss investor and UK clearer cited as a seller against the pound.
"No doubt the US jobs numbers have given the dollar a lift," said Adrian Schmidt, FX strategist, at Lloyds TSB. "In a world where others - notably China and Australia - are slowing, investors need to put their money somewhere, given Europe is not a good option either." But he added that the dollar's move up was unlikely to be sustained unless there was a radical shift upwards in interest rate expectations in the United States. The Federal Reserve has pledged to keep rates low well into 2014.