Pound Weakens as Middle East Tensions Escalate

The British pound has weakened against both the euro and U.S. dollar on Friday, as investors weigh diplomatic efforts to end the Iran war and reopen the Strait of Hormuz. Sterling was down 0.1% against the dollar at $1.3438 and similarly lower against the euro at 85.76 pence.

Tensions in the Middle East have escalated, with an attack by Yemen's Houthis on southern Saudi Arabia wounding 11 civilians on Thursday. The kingdom warned that coordinated attacks by the Houthis and Iran-backed Iraqi militias were imminent.

Meanwhile, U.S. nonfarm payrolls are forecast to have risen by 80,000 last month after an increase of 57,000 in June, according to a Reuters survey of economists. This data could provide clues about the Federal Reserve's interest rate path ahead as markets weigh the chance of a potential interest rate hike.

Nick Rees, head of macro research at Monex Europe, noted that attention would switch back to UK fiscal concerns if Middle East tensions cool down after payrolls. Investors will also get fresh UK economic data next week, including a gross domestic product reading for both the second quarter and June.