The pound rose to a four-month high on Thursday after comments from Bank of England policymakers prompted markets to scale back expectations of an interest rate cut in August, while the dollar fell slightly ahead of a U.S. inflation report due later in the day.
Sterling rose 0.12% to $1.2864, its highest since early March, after Bank of England policymakers said on Wednesday that price pressures remained, Reuters reported.
The US currency fell against a group of major currencies, with the Australian dollar up 0.16% at $0.6758, after earlier hitting its strongest level since January at $0.6763.
The euro was slightly higher at $1.0836, while the dollar index was steady at 104.91 against a basket of major currencies.
Markets are awaiting the release of US inflation data later today, with expectations indicating that the core inflation rate in the United States will rise by 0.2% on a monthly basis in June, bringing the annual rate to 3.4%.
According to the CME FedWatch tool, markets are now pricing in a more than 70% chance of a Fed rate cut in September, compared with around 50% a month ago.
The New Zealand dollar rose 0.2% to $0.6096, recovering some of its losses from the previous session when it fell 0.7% following a dovish bias from the Reserve Bank of New Zealand in its monetary policy statement.
The yen continued to decline, affected by the large difference in interest rates between the United States and Japan, and recorded in the latest trading 161.67 to the dollar, near the lowest level in 38 years.
