The British pound weakened below $1.35 to its lowest level since mid-August as the dollar stayed firm ahead of a widely expected Federal Reserve rate hike on Wednesday. The Bank of England is expected to leave rates unchanged on Thursday, despite persistent inflation pressures from energy costs and oil prices rising well above $100 a barrel amid renewed Middle East hostilities. BoE Governor Andrew Bailey has resisted expectations of another imminent increase. UK economic data showed growth reached its fastest pace in 18 months in July, supported by AI-related activity and momentum from a strong first half. Goldman Sachs expects Bank Rate to remain at 3.75% on Thursday, followed by a 25-basis-point increase in November as inflation persists and growth remains resilient. Markets are pricing four BoE rate hikes by mid-2027.