Pound Slips as Middle East Tensions and US Payrolls Data Steer Market Sentiment
The British pound slipped against both the euro and the U.S. dollar on Friday as investors remain cautious due to heightened Middle East tensions.
Brent crude futures eased to $82.16 a barrel, while sterling declined by 0.1% to $1.3438 against the U.S. dollar and traded at 85.76 pence per euro.
The Bank of England left interest rates unchanged last week, with markets pricing about 25 basis points of tightening by year-end and no full hike until February 2027.
Investors are monitoring the situation in the Middle East, where diplomatic efforts to end the Iran war and reopen the Strait of Hormuz continue alongside renewed tensions. An attack by Yemen's Houthis on southern Saudi Arabia wounded 11 civilians on Thursday, with authorities warning that coordinated attacks by the Houthis and Iran-backed Iraqi militias are imminent.
Nick Rees, head of macro research at Monex Europe, notes that a broader easing in global tensions would allow investor focus to return to UK fiscal concerns. He adds that if Middle East tensions cool after the payrolls report, attention can shift back to UK fundamentals, which he says are not supportive for the pound.
The U.S. nonfarm payrolls data is due next week, with economists forecasting a rise of 80,000 last month after a 57,000 increase in June. The data is seen as important for expectations around the Federal Reserve's interest rate path.