FX.co ★ Sterling Holds Near $1.35 Ahead of BoE Decision

The British pound hovered around $1.35 as investors weighed stronger-than-expected UK GDP data ahead of next week’s Bank of England policy meeting. UK output expanded 0.4% month-on-month in July, beating forecasts, while growth over the three months to July also remained at 0.4%.

Markets widely expect the BoE to keep interest rates on hold next week after Governor Andrew Bailey said on Tuesday that future decisions would hinge on economic and geopolitical developments, pushing back against the notion that another rate hike is inevitable. Even so, traders are fully pricing in four BoE rate increases by mid-2027, as the recent rally in oil prices continues to fuel inflation concerns.

In the US, the dollar stayed supported by rising expectations of a Federal Reserve rate hike next Wednesday, following stronger-than-anticipated core inflation data and indications that the labor market remains resilient.