The pound rose for the first time in three days against the dollar as a U.S. jobs report spurred debate among investors as to when the Federal Reserve will withdraw stimulus that has weakened the U.S. currency.
Sterling trimmed a weekly decline as data showed British house prices increased for a 10th month in November, adding to signs the economic recovery is gaining momentum. A separate report from ADP Research Institute two days ago showed U.S. companies hired more workers in November than analysts forecast, fueling speculation for a strong payrolls number. U.K. government bonds rose.
“Pound higher against the dollar is in a part of function of the U.S. dollar turning lower,” said Neil Jones, head of European hedge-fund sales at Mizuho Bank Ltd. in London. “It suggests the expectation of strong U.S. employment following the ADP data is limiting dollar gains. The pound tends to do well against a basket when global macro data is improving.”
The pound strengthened 0.1 percent to $1.6363 at 4:52 p.m. in London after falling 0.4 percent in the previous two days. The U.K. currency was little changed at 83.77 pence per euro.
U.S. employers boosted payrolls by 203,000 in November followed a revised 200,000 increase the previous month, the Labor Department said. Some economists predicted a job gain of as much as 230,000.
“I think it’s a case that the market was long dollars anyway going into the number in preparation for a strong reading so the market was unable to sustain that initial move,” said Ian Stannard, head of European foreign-exchange strategy at Morgan Stanley in London. A long position is a bet that an asset will rise.
Fed policy makers said they expected economic data to “warrant trimming the pace of purchases” in the near future from the current $85 billion of bonds each month, minutes of their Oct. 29-30 meeting released on Nov. 20 showed. They next meet on Dec. 17-18.
British home prices climbed 1.1 percent last month after rising 0.7 percent in October, according to Halifax, the mortgage unit of Lloyds Banking Group Plc.
Sterling has gained 5.6 percent in the past six months, the best performer of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro rose 4 percent and the dollar climbed 0.3 percent.
The yield on the benchmark 10-year gilt fell two basis points, or 0.02 percentage point, to 2.90 percent. The 2.25 percent bond due in September 2023 rose 0.155, or 1.55 pounds per 1,000-pound face amount, to 94.53. The yield has still increased 13 basis points this week.
Gilts handed investors a loss of 4 percent this year through yesterday, according to Bloomberg World Bond Indexes. German securities fell 1.9 percent and U.S. Treasuries declined 2.8 percent.
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