Sterling fell for the first time in a week on Wednesday as a stronger US dollar gained support from rising Treasury yields ahead of key labor market data, while investors awaited comments from new Federal Reserve Chair Kevin Warsh.

The pound slipped 0.23% to $1.3234 after advancing in each of the previous four sessions, its longest daily winning streak in a month.

Sterling ended June down 0.2%, extending its decline in the first half of the year to 1.6%, marking its weakest start to a year since 2022, when it fell nearly 10% between January and June.

Political uncertainty has also added to investor concerns. With Labour Prime Minister Keir Starmer preparing to step down, markets are questioning whether leading contender Andy Burnham can revive the British economy without placing additional strain on already stretched public finances.

The dollars resurgence, supported by the strength of the US economy and equity markets, has been a major factor weighing on sterling and other currencies.

Against the euro, however, sterling performed better during the second quarter, gaining 1.4% and trading near its strongest level since last August.

UK rate expectations shift

Expectations for additional Bank of England rate hikes this year have eased since tensions in the Gulf began to subside, allowing oil prices to retreat toward pre-war levels.

Money markets currently assign a 90% probability that the Bank of England will raise interest rates before year-end, compared with earlier expectations that had priced in as many as three rate increases.

The Bank of England is scheduled to meet later this month to discuss monetary policy, although economists broadly expect interest rates to remain unchanged.

US jobs data in focus

Among the most important events for currency markets this week, including sterling, is Thursdays US employment report, which could either reinforce or challenge growing expectations that the Federal Reserve may raise interest rates again in the coming months.

Central bank governors from around the world are gathering this week in Sintra, Portugal, for the European Central Banks annual forum.

Federal Reserve Chair Kevin Warsh will participate in one of the forums sessions before delivering remarks on Wednesday.

Given his preference for concise communication and limited public commentary from Federal Reserve officials, investors will closely scrutinize his remarks for clues about the future path of US interest rates.

Bank of England Governor Andrew Bailey is also scheduled to speak on Wednesday.

Andrew Bailey may be the person to watch, said David Stritch, strategist at Caxton. The Bank of England is currently the most balanced among major central banks in terms of policy direction, and so far Bailey has remained largely vague about the future path of policy.