UPDATE 2-Sterling shoots up after big U.S. jobs miss, UK election in focus

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

* Graphic: Trade-weighted sterling since Brexit vote tmsnrt.rs/2hwV9Hv (Updates rates, news)

LONDON, May 7 (Reuters) – Sterling rose versus the dollar and euro on Friday and was on track for weekly gains against both, as disappointing U.S. job data added pressure on the dollar, while traders watched for British local and regional election results.

The pound rose 0.5% in minutes, to a one-week high of $1.3972 versus the dollar after data from the Labor Department showed U.S. employers hired fewer workers than expected in April.

In earlier trade, sterling was unable to hold on to gains made on Thursday after the Bank of England slowed the pace of its trillion-dollar bond-purchasing programme.

But by 1451 GMT, the pound was 0.6% higher at $1.3976 versus the weakening dollar. It was up 0.1% against the euro at 86.90 pence.

Traders were also looking for evidence of any political risk after Thursday’s elections.

Of most interest to sterling traders is the Scottish election, where the pro-independence ruling Scottish National Party has vowed to call another referendum on breaking away from the United Kingdom if it wins a majority of seats.

The first results showed early successes for SNP, which won five of the first six seats to be declared, although there was an increase in support in some areas for opposition pro-union parties, indicating the final outcome of the election could be very close.

ING analysts said that a new Scottish referendum “is an event risk that could hold GBP back, but otherwise an optimistic assessment from the BOE yesterday should continue to see GBP supported”.

The BOE predicted a sharper rebound in the British economy based on easing COVID-19 restrictions, but said it needed clear evidence of a recovery before tightening policy. It also predicted that inflation would remain contained even with the accelerating recovery.

The upgraded growth and inflation forecasts are bringing some comfort for GBP bulls but the sterling rally in the first quarter “has already baked in a lot of good news into the price”, said Jane Foley, head of FX strategy at Rabobank.

Sterling had its best quarter since 2015 versus the euro supported by Britain’s faster vaccine rollout.

But as the vaccine push accelerates in the euro zone, Rabobank expects a slow move lower in EUR/GBP to 84.00 pence in the coming month, Foley said.

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