The pound fell the most in two weeks against the dollar after American employers added more jobs in May than economists forecast, weakening the case for further Federal Reserve stimulus that would debase the U.S. currency.
Sterling dropped from near the strongest since February versus the greenback as the Labor Department said U.S. payrolls climbed by 175,000 after a revised 149,000 increase in April. The pound weakened for the first time in three days against the euro after German industrial production rose the most in a year. U.K. government bonds fell as the Debt Management Office said in an e-mailed statement it will offer a new security maturing in July 2068 via banks in the week of June 24.
“Nonfarm payrolls is up about 10,000 above what it was forecast to be,” said Lee McDarby, head of dealing on the corporate and institutional treasury desk at Investec Bank Plc in London. “It makes sense for the dollar to be bought back up a bit against the pound.”
Sterling fell 0.4 percent to $1.5545 at 4:56 p.m. London time after declining 0.7 percent, the biggest drop since May 22. The U.K. currency has still gained 2.3 percent this week, the most since October 2009. It climbed to $1.5684 yesterday, the highest since Feb. 13. The pound weakened 0.2 percent to 85.05 pence per euro.
Sterling has strengthened 5.3 percent in the past three months, the best performer of 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar gained 1.3 percent and the euro strengthened 2.3 percent.
While U.S. payrolls increased, the unemployment rate rose to 7.6 percent from 7.5 percent. Fed policy makers have said they’ll maintain their $85 billion-a-month pace of asset purchases until the labor outlook improves “substantially.”
German industrial production jumped 1.8 percent in April from the previous month, the biggest gain since March 2012, the Economy Ministry said in Berlin.
The U.K. 10-year yield climbed five basis points, or 0.05 percentage point, to 2.07 percent. The 1.75 percent bond due in September 2022 declined 0.38, or 3.80 pounds per 1,000-pound face amount, to 97.315.
Gilts returned 0.5 percent in the past three months through yesterday, according to the Bloomberg World Bond Indexes. German bonds rose 0.1 percent and U.S. Treasuries were little changed.
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