The Pound Sterling (GBP) extends its winning streak for the fifth trading day against the US Dollar (USD) at the start of the week. The GBP/USD pair jumps to near 1.3480 due to the continued underperformance from the US Dollar, which is dragged by increasing expectations of interest-rate cuts by the Federal Reserve (Fed).

At the time of writing, the US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, trades 0.17% lower to near 98.00.

The US Dollar underperforms as traders have become increasingly confident that the Fed will reduce interest rates in the September policy meeting. According to the CME FedWatch tool, there is an 88% chance that the Fed will cut the federal funds rate by 25 basis points (bps) to the range of between 4.00% and 4.25%.

Fed members have started arguing in favor of unwinding monetary policy restrictiveness as labor market conditions are cooling down. Over the weekend, Fed Governor Michelle Bowman said at the Kansas Bankers Association signaled that the soft Nonfarm Payrolls (NFP) report for July has increased her confidence of three interest rate cuts this year.

"With economic growth slowing this year and signs of a less dynamic labor market becoming clear, I see it as appropriate to begin gradually moving our moderately restrictive policy stance toward a neutral setting," Bowman said.

Source: FXstreet