• The Pound Sterling moves higher back above 1.3200 against the US Dollar following Wednesday’s pullback.
• Traders focus on US core PCE inflation data for July, which can influence market speculation about the Fed’s rate cut size.
• Investors see the BoE delivering one more interest rate cut this year.

The Pound Sterling (GBP) rebounds from the key support of 1.3200 against the US Dollar (USD) in Thursday’s European session. The GBP/USD pair rises as the US Dollar (USD) edges lower after bouncing back strongly on Wednesday. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, faces pressure in an attempt to extend its recovery above the immediate resistance of 101.20.

The Greenback is expected to struggle to hold to its recent rebound as the Federal Reserve (Fed) is almost certain to begin reducing interest rates from the September meeting. While traders are split over whether the Fed will start the policy-easing spell with a 25 or a 50-basis-points (bps) cut, the rate reduction is fully priced in. 

Firm speculation for the Fed to start cutting interest rates from September is driven by Fed Chair Jerome Powell’s dovish commentary on interest rates at the Jackson Hole (JH) Symposium held last week. Powell said that  “the time has come for policy to adjust,” highlighting that the US central bank is now more worried about downside risks to the labor market as inflation looks on track to return to the desired rate of 2%.