LONDON, July 10 (Reuters) - The pound rose on Friday to an

almost one-month high against the dollar and a one-year peak

versus the euro as markets mulled central banks' likely response

to the latest rise in energy prices stemming from the

U.S.-Israeli war with Iran.

Sterling rose to $1.345 on Friday, the highest

since June 15, and was last up 0.1%.

Meanwhile the euro fell to 85.18 pence, the

lowest against the pound since late June 2025, before paring its

losses to trade flat.

Analysts have debated the reasons for the strength in

sterling in recent weeks with better-than-expected growth,

foreign companies purchasing UK firms, a calming of political

instability, and Bank of England policy all cited.

Monex Europe senior FX strategist Barry van der Laan said

comments late on Thursday from Bank of England chief economist

Huw Pill that interest rates will have to rise were likely

supporting the pound on Friday.

"That message reinforced the market's view that the Bank of

England still has less room to look through inflation than the

Fed or the ECB," said Van der Laan.

Yet he added: "With no important UK data today, sterling is

likely to be driven by broader dollar moves, oil prices and

Middle East headlines."

The International Monetary Fund this week upgraded its UK

growth forecasts, predicting a 1% expansion in 2026. The outlook

for Britain, a major energy importer, has been improved by the

June U.S.-Iran deal and subsequent slide in oil prices.

The IMF said Britain would be the third-fastest growing

economy in the G7 this year behind Canada and the U.S,

outstripping the euro zone countries.

However, oil prices have risen around 5% this week as the

U.S. and Iran have traded strikes and the U.S. cancelled an

Iranian oil trading waiver.

Brent crude was last trading roughly flat at $76 a

barrel, although it remained well below April's high of $126.

Former Greater Manchester mayor Andy Burnham took a big step

to becoming the next prime minister on Thursday after he secured

the support of the vast majority of Labour members of parliament

to replace Keir Starmer.

Some analysts have said the clarity on the next leader and

Burnham's commitment to the fiscal rules has helped the pound

slightly, although they caution UK markets could become more

turbulent once he starts outlining economic policies.