The pound dropped to the lowest level since July 2010 against the dollar after a U.S. report showed payrolls increased more than economists forecast, underpinning demand for the greenback.
Sterling posted its fourth weekly slide against the dollar as the data added to speculation the Federal Reserve is moving closer to ending a program of asset-purchases designed to kickstart the economy, while U.K. policy makers contemplate additional stimulus measures. Gilts declined as demand for safer assets waned.
“People are looking to buy the dollar against the most vulnerable currencies, which happen to be the pound and the yen at the moment,” said Neil Jones, head of European hedge fund sales at Mizuho Corporate Bank Ltd. in London. “While U.S. jobs data came in stronger than expected, there’s lot of uncertainty about the U.K. economic outlook.”
The pound fell 0.6 percent to $1.4928 at 4:45 p.m. London time after sliding to $1.4885, the weakest level since July 1, 2010. Sterling strengthened 0.3 percent to 87.04 pence per euro.
The U.K. currency has dropped 6 percent this year, the second-worst performer after the yen among 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro rose 1.6 percent and the dollar gained 3.4 percent.
Employment in the U.S. rose by 236,000 last month after a revised 119,000 gain in January, the Labor Department said in Washington. Economists surveyed by Bloomberg News forecast an increase of 165,000.
BlackRock Inc. (BLK:US) said it sold the U.K. currency after the Bank of England left its asset-purchase program unchanged yesterday, citing concern Britain’s leaders will struggle to stimulate growth.
“We sold sterling to express our view, given our already underweight position in gilts,” Scott Thiel, the head of global fundamental fixed income at BlackRock, the world’s biggest money manager, said in e-mailed comments. BlackRock is cautious on the U.K. because of “consistently above-target inflation, the coalition government struggling to maintain a cohesive message” and London’s waning dominance as an international business center, he said.
Prime Minister David Cameron’s commitment to cutting Britain’s debt isn’t working and is leaving the country in a similar position to the “weaker” euro-area nations, Goldman Sachs Asset Management Chairman Jim O’Neill said in an interview with Bloomberg Television’s Mark Barton in Cernobbio, Italy.
It is unclear what further asset-buying stimulus by the Bank of England would do to improve the U.K. economy as the weakness of the pound is increasing import costs and “cramping” consumers, O’Neill said.
The yield on the benchmark 10-year gilt climbed five basis points, or 0.05 percentage point, to 2.06 percent. The 1.75 percent bond due in September 2022 declined 0.43, or 4.30 pounds per 1,000-pound face amount, to 97.32.
U.K. government bonds lost 1.4 percent this year through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bunds and Treasuries both dropped 0.8 percent.
To contact the reporter on this story: Lucy Meakin in London at email@example.com.
To contact the editor responsible for this story: Paul Dobson at firstname.lastname@example.org.