Ella 
GBP/USD rebounded to around 1.2870 in London on Thursday and is close to its year-to-date high. The exchange rate was affected by multiple positive factors, such as speculation that the Federal Reserve (FED) will start cutting interest rates in September, which weakened the US dollar, falling bets on an early rate cut by the Bank of England (BoE) and a strong UK GDP report in May, all of which brought an optimistic outlook for the pound.
The US dollar index (DXY), which tracks the US dollar against six major currencies, retreated after failing to break through the short-term resistance level of 105.20.
The US dollar was under pressure after Federal Reserve Chairman Jerome Powell said in his semi-annual congressional testimony that deflation had eased. Powell did not declare a victory over inflation, but assured that policymakers are very focused on the path to achieving price stability.
In Thursday’s meeting, investors will pay close attention to the US Consumer Price Index (CPI) for June, which will provide clues on the market’s potential expectations for the Federal Reserve to cut interest rates in September. Economists expect core inflation, which excludes volatile food and energy items, to rise steadily by 0.2% month-over-month and 3.4% year-over-year. Overall inflation for the full year is expected to fall to 3.1% from 3.3% in May, while the monthly figure is expected to rise by 0.1% after being unchanged previously.
