By Johann M Cherian

July 4 (Reuters) - Sterling was poised for a weekly loss

on Friday, marking a lacklustre end to a week that saw fiscal

and political uncertainties rattle investor appetite for UK

assets.

The pound was flat and last fetched $1.36, while

against the euro it inched 0.1% lower and was last at

86.26 pence. Gilt yields were broadly steady in late morning

trading.

However, on a weekly basis, cable was down 0.4% against the

greenback, while it had fallen about 1% against the euro,

marking its biggest one-week drop against the currency since

U.S. tariffs on world economies took effect in early April.

UK stocks, bonds and cable witnessed a selloff earlier in

the week, after the government's welfare reforms were not well

received by ruling Labour Party members and stirred speculation

about the future of finance minister Rachel Reeves.

Some analysts even drew parallels between this week's market

reaction and the rout during former Prime Minister Liz Truss'

premiership in 2022.

With the Keir Starmer-led government completing one year in

power, uncertainties prevail over the options it has to balance

public accounts.

"There is speculation that given the difficulties the

government has faced in finding savings from welfare budgets,

tax rises are likely in the Autumn Budget," said Susannah

Streeter, head of money and markets at Hargreaves Lansdown.

"Bets are rising that the Bank of England will cut interest

rates more quickly with a reduction in August increasingly on

the cards. So, that's kept a bit more downwards pressure on

sterling."

Traders expect the Bank of England to lower borrowing costs

by 25 basis points next in September and are anticipating

another interest rate cut by the same amount before the year

ends, data compiled by LSEG showed.

Further, top ratings agency S&P said the inability of

Britain's government to make modest cuts to welfare spending

this week underscores that it has very limited budgetary room to

manoeuvre.

Despite the week's developments, the pound is at a near

four-year high against the dollar and is up about 9% so far this

year, having benefited from broader dollar weakness and as a

U.S.-UK trade deal offered some relief on the tariff front.