The pound fell, extending its decline to a fourth week versus the dollar, after an industry report showed U.K. manufacturing output grew at the slowest pace in a year in July.
Sterling also weakened against the euro as a separate report showed a gauge of manufacturing in the 18-nation region expanded at the same pace last month as in June. U.K. government bonds advanced with Treasuries, erasing earlier declines, after a report showing the U.S. added fewer jobs in July than economists forecast led investors to reduce bets on higher Federal Reserve interest rates.
“With weak data, sterling will be pressured lower,” said Roberto Mialich, a senior currency strategist at UniCredit SpA in Milan. “The firmer dollar or disappointing U.K. data -- as emerged of late -- may keep the pound on a sluggish tone.”
The pound fell 0.3 percent to $1.6836 at 4:37 p.m. London time after touching $1.6814, the lowest since June 12. The U.K. currency declined 0.8 percent this week. It may “slide to the edge of $1.68 or slightly lower,” UniCredit’s Mialich said.
Sterling depreciated 0.6 percent to 79.80 pence per euro, extending this week’s drop to 0.9 percent.
The purchasing managers’ index of U.K. manufacturing slipped to 55.4 from a revised 57.2 in June, according to Markit Economics. The median forecast of economists in a Bloomberg survey was for a reading of 57.2. Markit’s euro-area factory report showed the index at 51.8 in July.
Sterling has strengthened 1.8 percent in the past three months, according to Bloomberg Correlation-Weighted Indexes. The dollar has gained 2.1 percent, while the euro slid 1.4 percent.
Ten-year gilt yields declined the most in two weeks after the employment reports.
U.S. employers added 209,000 jobs in July after a revised 298,000 gain in June and the unemployment rate rose to 6.2 percent, figures from the Labor Department in Washington showed. The median forecast in a Bloomberg survey of analysts was for a 230,000 increase in payrolls.
Today’s data also showed average hourly earnings were unchanged in July. They were up 2 percent over the past 12 months. Economists had forecast a 2.2 percent gain.
“The disappointment on average hourly earnings is what took the steam out of the market’s sails,” said Richard Kelly, a senior strategist at Toronto-Dominion Bank in London. “The market would have been fine with over 200,000 jobs if it had just seen some wage growth behind it.”
The 10-year gilt yield fell five basis points, or 0.05 percentage point, to 2.55 percent after earlier rising to as high as 2.63 percent. The 2.25 percent bond due in September 2023 rose 0.429, or 4.29 pounds per 1,000-pound face amount, to 97.60.
Treasury 10-year (GUKG10) note yields dropped six basis points to 2.5 percent after rising as much as three basis points before the jobs data.
Gilts returned 4.7 percent this year through yesterday, Bloomberg World Bond Indexes show. Treasuries gained 3.2 percent and German securities earned 5.5 percent.
To contact the reporter on this story: Eshe Nelson in London at email@example.com