Sterling Holds Steady Amid Anticipation of U.S. Employment Data

The pound held steady on Friday as investors anticipated U.S. employment data, which could affect Federal Reserve rate cut decisions. The pound saw a 0.3% rise against the dollar this week but traded slightly lower on Friday. Futures suggest significant Fed rate cuts, contrasting with the Bank of England's approach.

The pound remained stable on Friday as investors awaited the release of U.S. employment data, which could increase market volatility. This data may influence whether the Federal Reserve implements a larger-than-expected rate cut this month.

Sterling, which has experienced a 0.3% rise against the dollar this week, was trading 0.1% lower at $1.3169. Earlier in the day, it reached a one-week high of $1.31925. In other currency movements, the euro rose by 0.1% against the pound to 84.35 pence. Meanwhile, the yen, benefiting from safe-haven flows this week, saw sterling drop by 0.5% to 187.90 yen.

Economists predict that U.S. nonfarm payrolls added 160,000 workers in August compared to July's 114,000. This report had previously sparked concerns about a rapid U.S. economic slowdown, leading to a significant selloff in risk assets. Futures indicate that traders expect as much as a 100 basis-point cut in Fed rates this year, contrasting with fewer rate cuts anticipated from the Bank of England.

XTB research director Kathleen Brooks noted that the dollar has weakened against other major currencies due to recent risk aversion. She added that market fears about the weak U.S. economic outlook have contributed to the dollar's struggle.

Looking ahead, British employment data, including wage growth figures, will be closely watched as these are of significant interest to the Bank of England. Speculators hold a bullish sterling position worth $7.45 billion, close to July's record. Any data that challenges the BoE's stance on UK rates could prompt a selloff in the pound.

(With inputs from agencies.)