Ella 
GBP/USD pared recent losses in Asia on Wednesday, trading around 1.2710. The reason for the pound’s rise against the dollar may be that weak U.S. employment data in July raised concerns about an imminent U.S. economic recession, while rising expectations that the Federal Reserve will launch a more aggressive interest rate cut in September have led to a tepid dollar.
The Chicago Mercantile Exchange’s FedWatch Tool shows that the probability of the Fed cutting interest rates by 50 basis points in September is now 67.5%, up from 13.2% a week ago.
According to Reuters, San Francisco Federal Reserve President Mary Daly said on Monday that risks to the Fed’s mission are becoming more balanced and she is open to the possibility of cutting interest rates at the upcoming meeting. In addition, Chicago Fed President Austan Goolsbee said the central bank is prepared to take measures if economic or financial conditions worsen.
In the UK, sterling faces challenges as the Bank of England (BOE) cuts interest rates by 25 basis points at its August meeting, as widely expected. In addition, market expectations now include the possibility that the Bank of England will cut interest rates twice more by December, by 25 basis points each time.
Sterling’s upside potential may be limited by widespread risk aversion. Iran-backed Hezbollah fired dozens of missiles at Israel in response to an Israeli airstrike in Tehran that assassinated Hamas leader Ismail Haniyeh, fueling market concerns about an escalation of conflict in the Middle East.
