Pound Rises Versus Dollar on U.S. Jobs-Growth Report; Gilts Gain

The pound rose to a two-week high against the dollar as data showed U.S. employers added fewer workers in August than analysts forecast, damping bets the Federal Reserve will pare currency-debasing stimulus measures.

Sterling had weekly gains versus the greenback, euro and yen after the Bank of England yesterday kept its bond-buying program unchanged and left the main interest rate at a record low. Gilts climbed as Russian President Vladimir Putin said his nation will assist Syria if it’s attacked, spurring demand for the safest assets. A report today showed U.K. manufacturing increased for a second month in July.

“The pound is benefiting from investors unwinding long dollar positions following the data,” said Neil Jones, the head of European hedge-fund sales at Mizuho Bank Ltd. in London. “I see further upside for the pound given the positive tone of recent U.K. economic data.”

A long position is a bet that an asset’s value will rise.

The pound appreciated 0.3 percent to $1.5632 at 4:49 p.m. London time after climbing to $1.5681, the highest since Aug. 21. It gained 0.8 percent this week. Sterling was little changed at 84.23 pence per euro, erasing an advance that took it to 83.92 pence, the strongest level since Jan. 24.

The U.S. economy added 169,000 workers last month following a revised 104,000 rise in July that was smaller than initially estimated. That compared with an increase of 180,000 projected by analysts.

The pound has strengthened 6.6 percent over the past six months, the best performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes, amid optimism U.K. growth is accelerating. The euro gained 3.7 percent and the dollar climbed 2 percent.

Factory Data

U.K. factory output rose 0.2 percent from June, when it gained a revised 2 percent, the Office for National Statistics said today in London. The increase was in line with the median forecast of 23 analysts’ estimates in a Bloomberg News survey. Industrial output was unchanged, the statistics office said.

A separate report showed the U.K.’s trade deficit increased to 9.85 billion pounds in July from a shortfall of 8.2 billion pounds in June. The median forecast of 17 analysts in a Bloomberg survey was for a deficit of 8.2 billion pounds.

Ten-year gilt yields dropped seven basis points, or 0.07 percentage point, to 2.94 percent after reaching 3.01 percent yesterday, the highest since July 27, 2011. The rate increased 16 basis points this week. The 2.25 percent security due September 2023 rose 0.6, or 6 pounds per 1,000-pound face amount, to 94.1.

Yield Spread

The extra yield investors demand to hold U.K 10-year gilts instead of German bunds widened to 100 basis points for the first time since May 2010 today.

The U.S. jobs data tempered speculation that the Fed will start slowing monetary stimulus this month.

Fed policy makers are debating whether the economy is strong enough to allow them to pare monthly purchases of $85 billion in Treasuries and mortgage debt. They next meet on Sept. 17-18.

The Bank of England’s nine-member Monetary Policy Committee led by Governor Mark Carney, meeting for the first time since introducing forward guidance on interest rates last month, held the asset-purchase target at 375 billion pounds yesterday. It also kept its official interest rate at 0.5 percent.

Under the central bank’s guidance policy, the MPC plans to keep its key interest rate on hold as long as unemployment exceeds 7 percent. The jobless rate was at 7.8 percent, according to data released on Aug. 14.

U.K. government bonds lost 5.1 percent this year through yesterday, according to Bloomberg World Bond Indexes. German securities dropped 3.1 percent and Treasuries declined 4.3 percent, the indexes show.

Before it's here, it's on the Bloomberg Terminal.