Sterling slid to a near four-month trough on Friday against the dollar, which was boosted when stronger than expected US employment data fed expectations of the Federal Reserve paring back its stimulus. The dollar rose to a near three-year high of 84.53 against a basket of major currencies after employers in the United States added 195,000 new jobs to payrolls, more than the 165,000 forecast in a Reuters poll, while the unemployment rate steadied at 7.6 percent.
This data would likely keep the Fed on track to slow down the pace of its asset purchases - in sharp contrast to the Bank of England, which on Thursday guided down expectations of future interest rate hikes. The pound was down more than one percent at $1.4890, having fallen to $1.4855, its lowest since March 12. Against a basket of currencies, sterling fell to 79.7, a level last seen on April 22.
"The US jobs data helped sterling's continued downside and we think it can go a lot lower," said Kiran Kowshik, currency strategist at BNP Paribas, adding that their year-end forecast for sterling was $1.43. "On the BoE ... we not only got a statement, we got quite a dovish one." It had posted its biggest daily fall since December 2011 on Thursday after the BoE surprised markets by issuing a statement with its decision to keep policy unchanged after the first meeting under new governor Mark Carney.
The BoE warned the market had been too quick to price in interest rate hikes further down the line, arguing this was not justified by recent UK economic developments. "An unusual statement with guidance was proof for sterling bears that Carney's arrival will mark the start of more monetary activism," said Nawaz Ali, market analyst at Western Union Business Solutions. The euro was up 0.7 percent at 86.24 pence, closing in on Thursday's 2-1/2 month high of 86.34 pence. The euro, however, stayed weak against the buoyant dollar after the European Central Bank on Thursday pledged to keep interest rates low.
