• The Pound Sterling drops to 1.2700 as delayed Fed interest rate-cut prospects dampen market sentiment.
• The strong US NFP report for May hit market speculation for Fed rate cuts.
• This week, investors will focus on UK Employment, US CPI and the Fed’s policy decision.

The Pound Sterling (GBP) seems vulnerable against the US Dollar (USD) near the round-level support of 1.2700 in Monday’s London session. The GBP/USD pair weakens as the market sentiment turns downbeat after investors decreased their bets that leaned towards the Federal Reserve (Fed) to start reducing interest rates from the September meeting.

The CME FedWatch tool shows that 30-Day Fed Funds futures pricing data suggest a 47% chance that interest rate will be lower than the current level in September, significantly down from the 59.6% recorded a week ago.

Investors were hopeful that the Fed would commence lowering its key borrowing rates from September in the first four days of the last week. Their confidence was driven by weaker-than-expected United States (US) JOLTS Job Openings for April and ADP Employmnet Change data for May. However, robust labor demand and upbeat wage growth indicated by the US Nonfarm Payrolls (NFP) report for May published on Friday spooked their confidence. Strong labor market conditions suggest a stubborn inflation outlook, which would force Fed policymakers to prefer maintaining the current interest rate framework for a longer period