Sterling strengthens to one-month high ahead of US jobs data

The UK pound continued to rise despite the widening trade deficit even as the market awaited the crucial US jobs data for clearer cues. Another data from the UK on Friday was the KPMG jobs report that showed permanent staff placements continued to rise in the country.

GBP/USD climbed to 1.5348, its highest since 2 January and up from the previous close of 1.5336.

The pound was up on Thursday when the Bank of England left rates and asset purchase target unchanged at the monthly review, providing no clues about its plans to reflate the economy as promised by the central bank governor a few days ago.

Sterling made a 0.85% jump on Thursday adding to the 1.2% gain made over the previous two days.

The UK currency managed to pull back from the 18-month low of 1.4951 touched on 23 January to this extend, despite the economy seeing trends of slowing growth and easing inflation. The year-on-year inflation rate in December was 1.3%, up from 1.2% but lower than the consensus of 1.4%.

BoE governor Mark Carney said at the World Economic Forum in Davos on 26 January that the central bank will work hard to return inflation to its 2% target.

As per data on Friday, total trade balance of the United Kingdom widened to £2.895bn in December from £1.841bn in November, revised from £1.406bn. Goods trade deficit widened to £10.154bn from £9.283bn when analysts were expecting only £9.100bn.

Meanwhile, a report by research firm KPMG showed permanent staff placements continued to rise in January, but the rate of expansion eased to a 20-month low.

Also, average starting salaries for permanent jobs continued to rise in January, with the rate of growth quickening to a four-month high. Temporary pay also increased further, KPMG said.

The UK economy expanded 2.7% from a year earlier in the fourth quarter, faster than the 2.6% growth in Q3 but trailing expectations of 2.8%, data showed on 27 January. The sequential rate fell to 0.5% from 0.7% compared to the consensus of 0.6%.

All eyes are now on the US non-farm payroll data due at 13:30 GMT. The market consensus is for the job addition to decrease to 234,000 from 252,000 in December while the unemployment rate to stay at 5.6%.