The British pound traded little changed on Tuesday as investors awaited further developments surrounding potential negotiations between the United States and Iran.

In trading, sterling edged up by less than 0.1% to $1.344 after posting strong gains late last week, supported by a weaker US dollar following official intervention to back the Japanese yen and the Federal Reserve's decision to leave interest rates unchanged.

Sterling was also broadly unchanged against the euro, with the single currency slipping less than 0.1% to 85.62 pence.

Oil retreats as markets await US jobs data

Oil prices declined earlier this week after US President Donald Trump said on Monday that talks with Iran were underway, easing concerns over inflationary pressures in energy-importing economies, including the United Kingdom.

However, Iran denied holding or planning any negotiations, prompting a partial rebound in oil prices, with Brent crude rising about 3% to $86.10 a barrel during Tuesday's trading.

Currency market volatility, together with the Federal Reserve's latest policy decision, helped sterling gain 1.4% over the final three trading days of last week.

Investors are also looking ahead to Friday's US nonfarm payrolls report for July, which could trigger significant market moves if it prompts traders to reassess expectations for the future path of US interest rates.

Focus on possible yen intervention

Markets also remain alert to the possibility of further intervention by Japanese authorities to support the yen, a move that could have broader implications across global currency markets.

Traders are watching for additional intervention after Japan and the United States carried out a rare joint operation to purchase the Japanese currency late last week.

According to two market sources cited by Reuters, the US Treasury bought yen using euros rather than US dollars in an unusual transaction that was widely seen as an effort to support Japan without creating the impression that Washington was seeking to weaken the US dollar.