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Sterling struggles to hold rally; dollar up ahead of US jobs

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Sterling traded lower against the dollar on Thursday, erasing earlier gains, as the British currency tried to snap a two-day losing streak.

The pound last traded at $1.2898, down 0.24 percent, against the greenback. It has been down more than 14 percent since the Brexit vote.

Earlier, the British currency rose, as better-than-expected UK factory data and a modest revival in risk appetite with the rise in some global stocks encouraged investors to book profits.

The British pound's outlook, however, remained bleak after Britain's shock vote to bolt the European Union, with some analysts expecting it to drop to $1.20 in coming months as the Bank of England prepares to ease monetary policy.

U.K. manufacturing and industrial output data for the three months to May were slightly better than expected, but they remained weaker from the previous month. The data, however, has been largely discounted by markets as they cover a period before the Brexit vote.

"Sterling action is nothing more than a technical flow," said Mark McCormick, North American head of FX strategy, at TD Securities in Toronto.

Investing in a post-Brexit world

"We have just seen a lot of panic in the past couple of weeks and now people are starting to square up positions ahead of the U.S. non-farm payrolls report. I think people want to get into that big risk event on the sidelines."

The U.S. dollar, meanwhile traded lower against the , with investors cautious ahead of a crucial U.S. non-farms payroll report due on Friday. The consensus forecast is for a 175,000 jobs gain for June, according to a Reuters poll, but investors remained wary given the unexpected negative surprise in payrolls the previous month.

The dollar was 0.6 percent lower against the yen at 100.72 , holding above its trough of 99 yen hit on June 24, the day after the UK vote. It trimmed losses after a report showed after U.S. private payrolls rose more than expected in June and jobless claims were lower than forecast.

The ADP National Employment Report showed private employers hired 172,000 workers in June, beating expectations for a 159,000 gain. In a separate report, the Labor Department said weekly claims declined to a seasonally adjusted 254,000 for the week ended July 2.