Market News
Sterling shrugs off local election to focus on US payrolls data - REUTERS
LONDON, May 3 (Reuters) - Sterling rose on Friday against a weakening dollar ahead of U.S. jobs data due later in the day, while local elections in Britain have left the currency undisturbed.
Markets are focusing on U.S. nonfarm payrolls data due at 1230 GMT for clues on when the Federal Reserve might cut rates after Fed Chair Jerome Powell told reporters this week that interest rates might have to remain elevated for longer but shot down talk of raising them again.
In Britain, the opposition Labour Party won a parliamentary seat in Blackpool South and control of several councils, inflicting heavy losses on the governing Conservatives. The thumping victory, which set the tone for two days of local results before a national election this year, left sterling undisturbed.
"There hasn't been much of a reaction in the pound to the results of yesterday's elections in England and Wales," said Jane Foley, head of forex strategy at Rabobank.
"The ruling Tory party has not fared well, but this has not come as a surprise. While cable is pushing higher today, this is the result of a broadbased fall in the U.S. dollar."
The pound was last 0.15% higher against the dollar at $1.2555.
After payrolls data, markets will be looking to the Bank of England's meeting next week for clues on when its policy easing could begin, Foley added. The BoE is widely expected to keep interest rates unchanged at 5.25% on Thursday, but with inflation slipping back towards target, a rate cut at the following meeting might be put on the table.
Markets see now a 65% chance of a BoE cut in June, according to LSEG data. In the meantime, British services companies reported the strongest upswing in activity in almost a year during April, despite a new surge in cost pressures, according to a survey that will be watched by BoE policymakers.
The S&P Global UK Services Purchasing Managers' Index (PMI) rose in April to 55.0, its highest level since May 2023 and up from a preliminary reading of 54.9. Readings above 50 represent expansion. Against the euro, the pound was little changed at 85.60 pence .
