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Dollar, pound tread water; Aussie bolstered by jobs report

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Dollar, pound tread water; Aussie bolstered by jobs report
Pound coins are seen in front of a displayed U.S. 100 dollar banknote in this picture illustration taken January 18, 2017. REUTERS/Dado Ruvic/Files   -   Copyright  Dado Ruvic(Reuters)
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By Tom Westbrook

HONGKONG (Reuters) – The dollar drifted lower on Thursday after lacklustre U.S. retail data and gathering doubts about a Sino-U.S. trade deal, while the volatile pound was on edge as Britain and the European Union scrambled to secure a last-minute Brexit deal.

As the greenback gave ground to major currencies, the biggest gainer was the Australian dollar <AUD=D3>, which jumped 0.4% from the session’s low after jobs data showed buoyant hiring, lowering chances of monetary easing in November.

Sterling <GBP=> edged higher to $1.2828 after swinging about a five-month high overnight, knocked around by a series of mixed headlines on the likelihood of progress at an EU leaders summit in Brussels later on Thursday.

It has surged some 5% since last week as negotiations stepped up.

“I think we’re all grateful that we might be coming to some sort of an end to the recent saga,” said Nick Twidale, director of Sydney-based trade finance provider Xchainge.

“Anything that isn’t a hard Brexit is going to be positive for the sterling,” he said, adding a deal or something close to one could push the pound to $1.3500 or above.

Failure could drop it below $1.2200, Commonwealth Bank of Australia analyst Richard Grace said in a note.

The U.S. dollar, meanwhile, had dropped on Wednesday as U.S. retail sales fell for the first time in seven months, painting a gloomy picture of the economy.

It drifted 0.1% weaker against the euro <EUR=> to $1.1083 and was steady against the Japanese yen <JPY=> at 108.76. Against a basket of currencies <.DXY> the dollar hit a month low of 97.898 overnight and was steady around that level on Thursday.

The Aussie <AUD=D3> jumped to $0.6786 after figures showed joblessness unexpectedly contracting a bit last month, taking some pressure off the central bank to further reduce interest rates in November.

“This is just what the doctor ordered,” said CBA Chief Economist Craig James.

“There is no reason for the Reserve Bank to cut rates again in November – giving the central bank more time to gauge the effectiveness of early rate reductions.”

Lingering worries about trade tensions between the United States and China kept a lid on gains for trade-exposed currencies.

Reports of a partial trade deal between the world’s two largest economies last week initially cheered markets, but a lack of details on the agreement has since curbed enthusiasm.

“Even if a deal is signed, it remains uncertain if the obligations can be fully met on both sides,” strategists at Singapore’s DBS Bank said in a note.

The New Zealand dollar <NZD=D3> was lower, following dovish comments from a top central banker on Wednesday, and sits at $0.6287, not far from a four-year low hit two weeks ago.

China’s yuan <CNY=> weakened slightly to 7.0975 per dollar.

(Reporting by Tom Westbrook; Editing by Sam Holmes)

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