Dollar steadies after tumble as investors eye imminent Fed cuts
Data on Friday showed U.S. employment growth undershot expectations in July while the nonfarm payrolls count for the prior two months was revised down by a massive 258,000 jobs, suggesting a sharp deterioration in labor market conditions.
Adding to headwinds for markets, Trump fired Bureau of Labor Statistics Commissioner Erika McEntarfer the same day, accusing her of faking the jobs numbers.
An unexpected resignation by Fed Governor Adriana Kugler also opened the door for Trump to make an imprint on the central bank much earlier than anticipated. Trump has been at loggerheads with the Fed for not lowering interest rates sooner.
The barrage of developments dealt a one-two punch to the dollar, which sank more than 2% against the yen and roughly 1.5% against the euro on Friday.
The greenback recovered some of its losses against the Japanese currency on Monday, last trading 0.14% higher at 147.60 yen. Still, it was down about 3 yen from its peak on Friday.
The euro fell 0.2% to $1.1560, while sterling eased 0.1% to $1.3263.
Against a basket of currencies, the dollar edged up 0.2% to 98.86, after sliding more than 1% on Friday.
"Market reactions to Friday night's events were swift and decisive," said Tony Sycamore, a market analyst at IG. "Equities and the U.S. dollar tumbled, along with yields."
The two-year Treasury yield fell to a three-month low of 3.6590% on Monday as traders heavily scaled up bets of a Fed cut in September, while the benchmark 10-year yield languished near a one-month low at 4.2060%.
Markets are now pricing in a more than 95% chance the Fed will ease rates next month owing to the weaker-than-expected jobs data, with over 63 basis points worth of cuts expected by December.
"We pull forward our baseline call for a 25 bps cut from the FOMC to September," said David Doyle, head of economics at Macquarie Group.
"While we don't see significant further weakness in the labor market, the results of this report are likely to shift the FOMC's assessment of the balance of risks to the outlook."
In other currencies, the Australian dollar slipped 0.17% to $0.6465, after rising 0.8% on Friday against a weaker greenback. The New Zealand dollar eased 0.24% to $0.5905.
The Swiss franc was last little changed at 0.8041 per dollar.
Switzerland was left stunned on Friday after Trump hit the country with one of the highest tariffs in his global trade reset, with industry associations warning of tens of thousands of jobs being put at risk.
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