Sterling edged higher against the euro and the dollar on Friday, after the release of closely watched US jobs figures positively surprised the market.
The non-farm payrolls report for July shows the economy added 255,000 jobs in July, better than the 180,000 forecast and not far off the upwardly revised 292,000 seen in June. The data will influence the outlook for US interest rates for the rest of this year, with a run of strong data making a rate rise from the Federal Reserve more likely.
The euro reversed its course against the dollar, surrendering gains of 0.2 per cent against the US currency to fall 0.4 per cent to at $1.1089.
Sterling is 0.1 per cent firmer against the US currency at $1.3107, after Thursday’s 1.5 per cent fall, which came after UK interest rates were cut by 25 basis points to a record low of 0.25 per cent. Against the euro, it is trading at €1.179, slightly stronger than Thursday’s close.
Wall Street equities markets were on track to rise in opening trade, with the S&P 500 called up 0.3 per cent. The yield on 10-year US Treasuries hit a session high of 1.5450 per cent, up 4 basis points.
James Knightley, senior economist at ING, called the US jobs data “another positive surprise”, adding: “The outcome of today’s report is supportive of the view that we could see a rate hike before year-end.
Risks
“It also backs up the assessment within the latest FOMC [Federal Reserve] statement that ‘near-term risks to the economic outlook have diminished.’ Nonetheless, we have our doubts it will happen given the mixed nature of the US data flow and political uncertainty relating to the election, while external risks remain a possible constraint.”
European stock markets are also making gains, with the FTSE 100 up 0.3 per cent at 6,771,0 and the more UK-centric FTSE 250 outperforming, up 1 per cent. The Xetra Dax 30 in Frankfurt is up 0.3 per cent and the region-wide Euro Stoxx 600 is up 0.4 per cent.
As well as cutting rates on Thursday, the Bank of England unveiled a new £70 billion bond-buying programme and a £100 billion “term funding scheme” allowing banks to borrow at close to the BoE’s base rate from the central bank’s reserves.
– Copyright The Financial Times Limited 2016
