Sterling steadies after worst monthly performance since 2022

LONDON, Aug 1 (Reuters) - The pound held steady on Friday, having posted its worst monthly performance against the dollar in three years, as the U.S. currency rallied after President Donald Trump imposed new tariff rates on dozens of trade partners.

Sterling lost nearly 4% in value in July, its biggest monthly decline since September 2022's so-called "mini-budget crisis" that drove the currency to a record low against the dollar and sparked turmoil across the UK bond market.

The Bank of England meets next week and is widely expected to cut interest rates by a quarter point to 4%, their lowest in 2-1/2 years.

The pound was last flat on the day at $1.3203, near its lowest since mid-May, having struck a near four-year high of $1.3787 just a month ago.

Friday's U.S. nonfarm payrolls report is likely to be key in either cementing the dollar's recent rally or bringing it to an end. A reading above the 110,000 increase forecast in a Reuters poll of economists could give the dollar an even bigger boost, especially as the worst fears over the impact of U.S. tariffs have ebbed.

"This dynamic is unlikely to change ahead of the weekend either, with little of note in the UK calendar for today. That leaves U.S. events top of mind for sterling traders, with uncertainty the dominant theme," Monex analysts said.

The biggest catalyst driving the pound down has been the deterioration in UK economic data. The BoE, among the more conservative of the major central banks when it has come to lowering borrowing costs, is now expected to deliver more rate cuts in the coming six months than either the European Central Bank or the Federal Reserve, based on money markets.