Sterling Edges Lower as Markets Await U.S. Jobs Data and Monitor Middle East Tensions

LONDON — Sterling slipped against the U.S. dollar and euro on Friday as investors monitored developments in the Middle East and awaited closely watched U.S. employment data that could influence expectations for the Federal Reserve’s interest-rate policy.

The pound was down around 0.1% at $1.3438 against the dollar and also weakened slightly against the euro to 85.76 pence. The cautious trading came as markets assessed renewed tensions in the Middle East and their potential impact on energy prices, inflation and global economic growth.

Market attention was focused particularly on the U.S. nonfarm payrolls report for July. Economists surveyed by Reuters expected the U.S. economy to have added about 80,000 jobs during the month, compared with 57,000 in June, while the unemployment rate was forecast to remain at 4.2%. The figures could have a significant bearing on expectations for the Federal Reserve’s next policy moves.

The dollar has benefited from safe-haven demand as investors remain concerned about geopolitical risks in the Middle East. At the same time, uncertainty surrounding possible negotiations involving Iran and the reopening of the Strait of Hormuz has kept energy markets volatile. Brent crude was trading around $82 a barrel on Friday.

For sterling, the absence of major domestic economic catalysts has left the currency particularly sensitive to international developments. Investors are also looking ahead to UK economic data due next week, which is expected to provide further insight into the impact of the Iran conflict on Britain’s economy.

The Bank of England recently kept interest rates unchanged, citing uncertainty surrounding inflation and the economic consequences of the conflict. Financial markets currently do not expect another UK rate increase until February 2027.

Analysts said a reduction in geopolitical tensions could shift investors’ attention back toward Britain’s fiscal position and domestic economic challenges, potentially creating additional pressure on sterling.

The pound’s latest decline reflects the broader caution prevailing in currency markets, where investors are balancing geopolitical risks, energy prices and divergent expectations for central-bank interest rates. The U.S. employment report is therefore expected to be a key catalyst for currency markets as traders reassess the outlook for U.S. monetary policy and the dollar.