Pound Recovered Against Dollar as Fed Rate Hike Fears Ease

The British Pound has recovered its early losses against the US Dollar and is currently trading at around 1.3495, after a European trading session on Thursday.

This bounce back in the GBP/USD pair comes as investors are prioritizing easing fears of the Federal Reserve's interest rate hikes over ongoing Middle East tensions, which has put pressure on the US Dollar.

The US Dollar Index (DXY) is currently trading 0.1% lower at near 99.90, while traders have trimmed their bets for a September Fed interest rate hike due to easing US upside inflation risks and growing downside labor market risks.

Analysts at Commerzbank note that July's US Consumer Price Index (CPI) came in broadly in line with expectations, giving the Federal Reserve more room to stay on hold. Similarly, Danske Bank researchers highlight that July's CPI was also close to expectations, with headline inflation at 3.4% year-over-year and core inflation at 2.5% year-over-year.

Going forward, investors will focus on the US Producer Price Index (PPI) data for July, which is expected to have cooled down to 4.9% year-over-year for headline PPI growth, and 4.2% year-over-year for core PPI growth.