FX.co ★ Sterling Steadies Ahead of BoE and Fed Decisions

The British pound held just below $1.35, hovering near its weakest level since early August, as investors absorbed an in-line UK inflation report ahead of interest rate decisions by both the Bank of England and the US Federal Reserve. UK annual inflation rose to 3.1% in August from 2.9% in July, matching forecasts and largely reflecting higher fuel costs. Core CPI, which excludes more volatile components, was unchanged at 2.6%, while services inflation—a key metric for the Bank of England—registered 3.4%, slightly under the 3.5% expected. The BoE is widely anticipated to leave rates unchanged on Thursday, while a November hike remains in play but with reduced conviction. Markets have also scaled back expectations for tightening through the end of next year, now pricing in four rate increases instead of five. Meanwhile, the US dollar stayed supported ahead of the Fed meeting, where policymakers are broadly expected to raise interest rates for the first time in about three years.