GBP/USD rises as Fed cut probability surges while BoE stays hawkish

GBP/USD advanced 0.4% to 1.2680 as diverging central bank expectations drove sterling strength against the dollar. Markets now price a 75% probability of a Federal Reserve rate cut in September, up from 60% last week, following softer US inflation components. Conversely, Bank of England rate cut expectations have diminished, with UK services inflation remaining sticky at 5.2% year-over-year. The pound found strong bid support at 1.2620, with buyers emerging on dips. Technical momentum indicators suggest further upside potential, with immediate resistance at 1.2700 psychological level, followed by 1.2730 monthly high. The widening interest rate differential favors continued GBP strength, particularly if upcoming UK employment data maintains its robust trend. Traders should monitor Friday's US PCE inflation data, which could cement Fed easing expectations and propel cable toward 1.2750.