• The Pound Sterling underperforms the US Dollar as market expectations for the Fed opting for a big interest-rate cut have diminished.
• US employment growth came in lower than expected in August, while the jobless rate ticked down.
• This week, investors will majorly focus on the UK Employment and the US inflation data

The Pound Sterling (GBP) struggles to hold the key support of 1.3100 against the US Dollar (USD) in Monday’s London session. The GBP/USD pair faces selling pressure as the US Dollar (USD) extends its recovery, with US Dollar Index (DXY) jumping to near 101.40. The Greenback gains ground as market bets that the Federal Reserve (Fed) will start its policy-easing process aggressively have diminished after Friday’s United States (US)Nonfarm Payrolls (NFP) data.

According to the CME FedWatch tool, the probability of the Fed reducing interest rates by 50 basis points (bps) to 4.75%-5.00% in September has declined to 27% from the 41% recorded before the release of the data for August.

The NFP report showed that job growth is broadly cooling compared to the readings seen in the last couple of years, the Unemployment Rate ticked lower, as expected, and wage growth accelerated. Even though there is increasing evidence that the labor market is softening, the latest data is strong enough to keep the US economy safe from entering a recession. The assessment that the labor market is holding up weighs on market expectations of a large Fed rate cut, uplifting the US Dollar.