The British pound edged higher to just below $1.35 after UK inflation came in hotter than expected. July CPI rose 3.8% year-on-year, the fastest pace since January 2024 and above economists’ forecasts. The data prompted traders to scale back bets on Bank of England rate cuts this year, with markets now pricing only about 10 basis points of easing by December - less than a 50% chance of another cut. Instead, a quarter-point reduction is seen as more likely in early 2026. Stronger-than-expected GDP and jobs data had already tempered expectations for further easing, and the upside surprise in inflation has further reduced the likelihood of near-term cuts. With growth holding up and inflation running above forecasts, another rate cut this year could be viewed as too risky.