FX.co ★ Pound Posts 1% Monthly Gain

The pound ended July just above $1.34, gaining more than 1% against the US dollar as investors reassessed the Bank of England’s latest policy decision and took comfort from reduced political uncertainty following the appointment of the UK’s seventh prime minister in a decade. Investor confidence was further supported by the new government’s pledge to maintain fiscal discipline. The BoE voted 6–3 to keep interest rates on hold, with three policymakers favoring a hike, defying expectations of a 7–2 split. Even so, Governor Andrew Bailey played down the likelihood of an imminent tightening cycle, stressing that disinflation remains on track, while some officials indicated that rate cuts could return to consideration if the Iran conflict eases. Markets are now pricing in just one BoE rate increase by year-end. In the US, the Federal Reserve also left interest rates unchanged this week, with investors expecting two hikes by June next year as renewed US–Iran tensions continue to cloud the economic outlook.