Betting on a US interest rate cut at the September meeting is growing, following Federal Reserve Chairman Jerome Powell's dovish tone on the risks of a weak labor market.

Although contract pricing indicates a 70-80% probability of a 25 basis point cut, expectations remain cautious as investors await this week's Personal Consumption Expenditures (PCE) inflation report to determine the outlook.

The debate over the Fed's independence has also intensified after political developments have confounded markets, increasing their sensitivity to any surprises in upcoming data.