Pound Holds at US$1.35, Markets Await BoE Decision

The British pound held steady around US$1.35 in trading on Friday (September 11th), as investors weighed stronger-than-expected UK economic growth data ahead of the Bank of England's policy decision next week.

UK gross domestic product data showed growth of 0.4% month-on-month in July, beating market expectations. Meanwhile, economic growth in the three months to July also held at 0.4%, indicating that UK economic activity remains quite solid.

Despite the stronger economic data, the market expects the Bank of England to maintain interest rates at its meeting next week. BoE Governor Andrew Bailey previously stated that future policy decisions would depend on economic and geopolitical developments.

Bailey's statement dampened the view that another interest rate hike was imminent. However, the market is still pricing in four BoE rate hikes by mid-2027, especially as the oil price rally has renewed inflation concerns.

In the United States, the US dollar continues to receive support from rising expectations of a Federal Reserve interest rate hike next week. These expectations were strengthened after US core inflation data came in higher than expected and the labor market continued to demonstrate resilience.

Newsmaker Analysis: GBP/USD is currently in a tug-of-war between support from UK GDP data and pressure from a persistently strong US dollar. If the BoE signals caution and the Fed remains hawkish, the pound risks struggling to break through the upper range. However, if the BoE maintains a cautious tone on inflation while US data begins to weaken, sterling has the potential to strengthen again above US$1.35. (asd)