The British pound weekly rally may pause after three consecutive gains, with intensified long and short positions ahead of the Bank of England meeting

(1) The British pound edged up slightly to $1.3318 on Friday, but is still down about 1% so far this week, likely ending its previous three-week winning streak. This is mainly due to weak inflation data and worsening Middle East tensions. (2) The pound fell for the fourth consecutive trading day against the euro, dipping slightly to €1.1692, indicating that demand for the pound is weakening in cross-currency trades, as funds turn more cautious ahead of key risk events. (3) The market is closely watching next week’s Bank of England policy meeting, with policymakers facing a tough balance between inflationary pressures and economic growth. Any signal of an extended pause in the rate hike cycle could weigh on the pound’s performance. (4) Institutional analysis pointed out that July's rally in the pound has already appeared excessive. The current inflation situation and the stance of most Monetary Policy Committee members to keep rates unchanged are more consistent, limiting further short-term upside. (5) Meanwhile, ongoing geopolitical tensions in the Middle East, combined with persistently high oil prices, are dampening sentiment for risk currencies. Investors are reevaluating their portfolios ahead of next week’s decision, with the short-term direction of the pound likely to depend on the Bank of England’s tone and shifts in global risk appetite.