Sterling edged lower on Friday as the potential for earlier Federal Reserve interest rate hikes strengthened the dollar overnight, although pandemic uncertainties continued to weigh on the broader forex market.

The dollar leapt against its more risk-sensitive Australian and New Zealand counterparts ahead of crucial US jobs data that could clear the path to earlier Federal Reserve interest rate hikes.

Sterling fell 0.2 per cent to $1.328, within striking distance of its lowest level since December 2020 hit on Tuesday.

Against the euro, the pound edged 0.15 per cent lower to 85.07 pence.

ING analysts said that the sterling index now “sits not far from mid-range” traded since March.

They forecast that dollar strength would be the likely driver of sterling until the Bank of England’s rate decision on Dec. 16.

A survey by the BoE, which is weighing up whether to raise interest rates, showed British companies are struggling to find the staff they need and expect higher inflation in the year ahead.

UBS argued that sterling could find support from the UK government’s rush to expand its vaccine booster campaign to fight the new Omicron coronavirus variant.

“However, this relative advantage would very likely be drowned out if a worsening global situation led to a further correction in global equities,” it said in a research note.

Some analysts said press reports that the US was to delay trade talks with the UK over post Brexit concerns regarding the Northern Ireland protocol might add further uncertainty to the pound.

A US administration official on Thursday said the country’s failure to remove tariffs on UK steel and aluminium has no connection to concerns about post-Brexit trade rules affecting Northern Ireland.