The pound held near $1.3525 on Friday after gaining 0.3% Thursday, with traders awaiting the August U.S. nonfarm payrolls report for clues about the dollar's direction. Money markets priced two Bank of England (BoE) rate increases over the next six months, although economists expect rates to remain unchanged later this month as officials assess wage growth, corporate pricing power and energy-driven inflation linked to the Iran war. BBVA strategists remained mildly bearish on sterling, saying the BoE was unlikely to be very hawkish amid supply shocks, a 3.75% policy rate, weak UK labor-market conditions and a complicated fiscal backdrop. They said higher energy prices could eventually prompt a policy recalibration that supports sterling and its carry appeal, but noted that more than two hikes were already priced in. A BoE survey showed businesses expect prices to rise slightly more slowly over the coming year. Geopolitical tensions also increased after Argentine President Javier Milei said Argentina would sanction oil companies drilling in the Falkland Islands, while British defence minister Wes Streeting reaffirmed the United Kingdom's commitment to the territory. U.S. Trade Representative Jamieson Greer separately said Britain was choosing Brussels over America, complicating efforts to expand its trade deal with Washington. UK markets showed little immediate stress, with benchmark 10-year gilt yields unchanged at 5.1431%.