Pound Extends Gains as Markets Await US Jobs Data

2026-09-04 08:15 By Joana Ferreira 1 min. read

The British pound extended gains above $1.35 on Friday, rebounding from two-week lows as investors awaited fresh direction from US employment data due later in the day while continuing to digest signals from major central banks.

Bank of England Chief Economist Huw Pill said on Thursday that raising interest rates now could reduce the risk of the central bank having to tighten policy more aggressively later to contain inflation, which has risen amid the fallout from the Iran war.

Markets are now fully pricing in a BoE rate hike by year-end, with another increase expected by March 2027.

Meanwhile, Federal Reserve Governor Christopher Waller said recent data showed signs of disinflation and that, if upcoming figures confirmed the trend, he would favor keeping interest rates unchanged at this month’s policy meeting.

Markets responded swiftly, with futures pricing in roughly a 50% chance of a Fed rate hike this month, down from around 63% a day earlier.



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Pound Extends Gains as Markets Await US Jobs Data
The British pound extended gains above $1.35 on Friday, rebounding from two-week lows as investors awaited fresh direction from US employment data due later in the day while continuing to digest signals from major central banks. Bank of England Chief Economist Huw Pill said on Thursday that raising interest rates now could reduce the risk of the central bank having to tighten policy more aggressively later to contain inflation, which has risen amid the fallout from the Iran war. Markets are now fully pricing in a BoE rate hike by year-end, with another increase expected by March 2027. Meanwhile, Federal Reserve Governor Christopher Waller said recent data showed signs of disinflation and that, if upcoming figures confirmed the trend, he would favor keeping interest rates unchanged at this month’s policy meeting. Markets responded swiftly, with futures pricing in roughly a 50% chance of a Fed rate hike this month, down from around 63% a day earlier.
2026-09-04
Pound Stabilizes as Dollar Weakens
The British pound stabilized around $1.35, pausing its recent selloff and hovering near a two-week low, as a sharp rally in the yen weighed on the US dollar and easing oil prices provided some relief. The yen strengthened on rising expectations of a Bank of Japan rate hike and the possibility of official intervention, prompting broad-based dollar weakness. Meanwhile, Brent crude retreated from six-week highs after US President Donald Trump said the renewed US military campaign in Iran would not last long. Sterling nevertheless remains under pressure from concerns over energy-driven inflation, higher interest rates and the UK’s fiscal outlook, despite Prime Minister Andy Burnham’s efforts to reassure markets of the government’s commitment to fiscal discipline. Markets are now fully pricing in a Bank of England rate hike by year-end, with another increase expected by March 2027.
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Sterling Slides to Two-Week Low on Risk Aversion
The British pound fell to $1.35, hovering near a two-week low, as investors moved away from riskier assets amid concerns over the economic impact of the energy shock triggered by renewed hostilities in the Middle East. Meanwhile, investors digested Prime Minister Andy Burnham’s speech to the House of Commons, in which he reaffirmed the government’s commitment to fiscal responsibility and reducing debt, while saying the early budget date was intended to curb speculation. Chancellor John Healey is expected to deliver his first major speech in the role as soon as next week. Markets continue to price in a 25-basis-point BoE rate hike by year-end, with expectations reinforced by accelerating UK shop-price inflation. In the US, markets are pricing in a 66% probability of a September Fed hike following hawkish remarks from Fed Chair Kevin Warsh and higher oil prices.
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