Ella 
GBP/USD was trading around 1.2770 during early European trade, rising for a second day on Friday. GBP/USD’s gains may be due to growing expectations that the US Federal Reserve will cut interest rates in September.
According to the CME FedWatch tool, markets are now fully pricing in a quarter-point rate cut from the Federal Reserve in September. In addition, falling U.S. Treasury yields have put additional pressure on the dollar, with U.S. Treasury yields at 4.01% and 3.97% at press time.
On Thursday, Kansas City Fed President Jeffrey Schmid said tapering monetary policy may be “appropriate” if inflation remains low. According to Reuters, Schmid pointed out that the Fed’s current policy is “not that restrictive” and that although the Fed is close to the 2% inflation target, it has not yet fully achieved it.
Across the pond, Sterling (GBP) faced challenges following the Bank of England’s (BOE) decision last week to cut interest rates from a 16-year high. The Bank of England cut interest rates by a quarter of a percentage point to 5% after a narrow vote among policymakers divided over whether inflationary pressures have been eased sufficiently.
The upside for GBP/USD may be limited as safe-haven flows increase amid rising geopolitical tensions in the Middle East. Israeli forces stepped up airstrikes in the Gaza Strip, causing at least 40 casualties on Thursday, according to Palestinian medics.
