Sterling climbs as dollar drops on US job data

Greenback weakness shows effects of commerce tensions: expert

The British pound gained on Friday as the dollar fell after weaker-than-expected data on US job creation and renewed worries about China’s reaction to the threat of further tariffs on Chinese goods by US President Donald Trump.

The greenback slid against the safe-haven yen and Swiss franc after China threatened to launch fresh trade measures if the US followed through on a threat to impose tariffs on an additional $100 billion worth of Chinese goods. Sterling rose 0.6 percent against the dollar to $1.4107.

The bulk of the gains came after a report showing the US economy in March created the fewest jobs in six months. The dollar fell against most major currencies.

“Tension between the world’s two largest economies keeps rising and that is hurting global growth and the dollar,” said Ronnie Chopra, chief market strategist at the Knightsbridge Trading Academy.

Against the euro, the pound strengthened 0.3 percent to 87.10 pence. The pound has rallied since Britain last month secured a transition deal to cover the 21-month period after it leaves the EU, and the Bank of England (BOE) confirmed that a policy of monetary tightening would be sooner rather than later. Sterling forecasts are at their highest since Britons voted in 2016 to leave the European Union, a Reuters poll found on Friday.

That is because of optimism driven by progress in divorce talks and expectations of another BOE interest rate hike next month. But some analysts say uncertainties over Brexit remain and that broad dollar weakness – linked to the trade dispute between the US and China – is keeping sterling above $1.40.

“A lot of good news is already factored in. Brexit remains a can of worms,” said Chopra.

He added that the UK economy would need to perform well and that the progress of Brexit talks has helped the pound go above $1.45 this year.

Other analysts also advise against getting too positive about the pound.

“With the most challenging issue over Northern Ireland remaining unresolved, we view the balance of risks as increasingly negative,” Hans Redeker, global head of currency strategy at Morgan Stanley, said in a note.

Traders last week largely shrugged off disappointing survey data and searched instead for more meaningful signs of economic weakness that could deter the BOE from its path of monetary tightening.

A survey on Thursday showed the IHS Markit/CIPS services Purchasing Managers’ Index (PMI) tumbling to a worse-than-expected 51.7 from February’s reading of 54.5 because of weak consumer demand and bad weather, which appeared to weigh on the British currency.