Pound breaks seven-day rally as dollar steadies after jobs data

LONDON, July 6 (Reuters) - The pound fell on Monday, breaking a seven-day stretch of gains as the dollar recovered some strength following a selloff last week after soft U.S. jobs data. 

Sterling was last down 0.1% at $1.3338 and was steady against the euro, which traded at 0.8055 pounds.

The dollar fell broadly last week after the monthly U.S. employment report showed far fewer workers were added to payrolls than expected in June, and also in May and April, prompting investors to wind down bets that the Federal Reserve could raise rates as soon as this month. The pound gained 1.1% against the dollar last week in its strongest weekly performance in three months.

The drop in the oil price back towards $70 a barrel has taken the pressure off central bankers to raise borrowing costs, including the Bank of England. Markets are attaching a 70% chance of just one rate rise this year, compared with at least one rise and a strong chance of a second just a couple of weeks ago.

BoE Governor Andrew Bailey said last week the central bank was not in a position to consider cutting interest rates.

A BoE survey on Friday showed UK companies expected their prices to rise 4.1% in the year ahead in the three months to June, up from 4.0% in May and the highest since early 2024, suggesting the energy price shock had yet to release its grip on corporate pricing plans.

On the political front, the frontrunner to succeed Keir Starmer as prime minister, Andy Burnham, has yet to pick a finance minister.

Investors have expressed concern about who might take the job and what that might mean for Britain's stretched finances. Online betting platform Polymarket places a 55% chance of former energy minister Ed Miliband, who is known to be more left-leaning and favour more expansive fiscal policy, getting the job.

"Andy Burnham seems likely to take the post of PM around the 20th of this month, but first, he needs his Chancellor. Shockingly, Ed Miliband is the bookies' favourite, quite why is difficult to say, with the former energy secretary and Labour party leader being well known for more fiscally expansive budget ideas than the Treasury is likely comfortable with," David Stritch, currency analyst at Caxton FX, said.

Burnham said last week he had not made a decision on who he would appoint to the role. 

On June 22, when Starmer announced he would step down, traders on Polymarket were attaching a 73% chance of former health secretary Wes Streeting becoming finance minister, while Miliband was at 10%.

Since then, UK government bond yields have dropped by 12 basis points to 4.79%, but have crept up from a three-month low of 4.676% struck on June 24, as Miliband's chances have risen.  

(Reporting by Amanda Cooper; Editing by Sharon Singleton)