Pound Holds Steady at $1.34 as UK July GDP Rises 0.4%

The British pound held steady against a strengthening U.S. dollar even as official figures showed stronger-than-expected UK economic growth for July, with markets instead focusing on upcoming Federal Reserve policy decisions and U.S. inflation data.

Gross domestic product in the UK rose 0.4% in July, beating consensus forecasts and improving upon the 0.3% gain recorded in June, according to an Investing.com report. Roughly half of the monthly economic expansion was driven by the information technology sector.

"We continue to see upside potential for the dollar," said Francesco Pesole, FX strategist at ING, in a statement regarding currency markets.

Pesole noted that a smaller-than-expected Treasury buyback and Treasury Secretary Scott Bessent's reluctance to actively fight the bond market have helped restore the dollar's positive correlation with long-end Treasury yields.

How US Inflation Expectations Drive Forex Markets

Ahead of the August consumer price index release, financial markets priced in 18 basis points of monetary easing for the September Federal Open Market Committee meeting. Consensus estimates pointed toward a 0.4% month-on-month increase for headline inflation and a 0.2% rise for core figures.

Broader U.S. price pressures remain visible in government figures. According to FRED economic data, the Consumer Price Index for All Urban Consumers (CPI-U) stood at 334.131 as of August 1, 2026.

Bank of England Outlook and Policy Dissents

Although the UK growth figures exceeded expectations, analysts anticipated steady monetary policy from the central bank. Bank of America projections indicated that the Bank of England would maintain interest rates at 3.75% through a 6-3 vote split.

Policy makers Huw Pill, Megan Greene, and Catherine Mann were expected to dissent from the majority, pushing instead for an immediate interest rate hike to combat persistent domestic price pressures.