Sterling drifts lower as UK adds record number of jobs

·2 min read

* Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh

* Graphic: Trade-weighted sterling since Brexit vote http://tmsnrt.rs/2hwV9Hv

LONDON, Jan 18 (Reuters) - Sterling traded lower against the dollar on Tuesday after data showed British employers added a record number of staff in December, another sign the economy's rebound could potentially fuel further inflation.

The 184,000 employees added to British payrolls may vindicate traders who priced in another Bank of England interest rate hike in February but the fact that pay had its weakest performance since July, 2020 might also reassure dovish policy makers.

GDP data on Friday showed the economy is bigger than what it was before the first COVID-19 lockdown and the unemployment rate for the three months to the end of November fell to 4.1%.

Boosted by the BoE being in December the world's first major central bank to raise interest rates since the coronavirus pandemic, the pound rallied over 4% from its December lows but has lost ground in the last three sessions.

"Expectations have already run quite far," wrote Commerzbank analyst You-Na Park-Heger, adding that investors would be eagerly waiting for monetary policy clues when BoE governor Andrew Bailey speaks to the Treasury Select Committee on Wednesday.

An accusation that British prime minister Boris Johnson lied to parliament about a lockdown party by former senior adviser Dominic Cummings had seemingly little impact on the pound.

It remains unclear at this stage whether Johnson will be able to save his premiership from the so-called "partygate" scandal but investors don't believe the fate of the Prime Minister is a game changer for the currency.

"The political developments surrounding Prime Minister Boris Johnson seem to be merely an aside for the FX market by the way, and that is likely to remain the case for now," Park-Heger said.

Against the U.S. dollar, the pound lost 0.15% higher at $1.3622. It hit a late-October high of $1.3749 last week.

The pound's weakness against the greenback in morning trading comes as a jump in U.S. Treasury yields pushed the dollar index to a six-day high.

Sterling was down 0.07% against the euro at 83.62 cents. (Reporting by Julien Ponthus, editing by Ed Osmond)

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