FX.co ★ Pound Remains Below $1.34 on Softer UK Inflation

The British pound held below $1.34, its weakest level in more than a week, after UK inflation slowed more than expected, dampening the likelihood of a Bank of England interest rate hike. Annual inflation eased to 2.6% in June, its lowest reading since March 2025 and beneath forecasts of 2.7%, largely reflecting lower transport and food costs. Even so, core inflation, at 2.6%, and services inflation, at 3.6%, were both slightly above expectations. Business sentiment remains cautious, with CBI economist Martin Sartorius warning that price pressures could re‑accelerate in the coming months. At the same time, new Chancellor John Healey welcomed the softer inflation data but argued that additional support is still required. The government has unveiled measures including a cut in VAT on electricity bills and a £2 cap on single bus fares across England from January. Beyond the UK, geopolitical risk intensified in the Middle East after President Donald Trump warned of further strikes on Iran and vowed retaliation if Iran‑backed Houthi rebels attempt to disrupt shipping in the Red Sea.