The United States dollar index (DXY) began the new week at 97.904 after touching multi-week lows of 97.43 during Friday's session, pressured by a combination of soft data and falling Treasury yields.
Nonfarm payrolls showed the economy added just 22,000 jobs in August, far short of the 75,000 expected.
The unemployment rate rose to 4.3%, while June’s figures were revised to show a net job loss.
Federal Reserve officials sent mixed signals. New York Fed President John Williams noted rates may fall eventually, but said more evidence is needed. Richmond’s Tom Barkin also spoke of modest adjustments ahead.
CME Group FedWatch Tool data now shows an 8% chance of a larger half-point September cut, while implied rates suggest 70 bps of easing by year-end and more than 150 bps by the end of 2026.
Euro climbs on stronger GDP, weaker dollar
The EUR/USD currency pair rose to 1.1759 last week as dollar weakness accelerated after the jobs data miss.
Eurozone GDP for the second quarter was revised upward on an annual basis, offering additional support.
Traders now turn to next week’s U.S. consumer price index report to gauge whether disinflation continues.
A softer print could cement the case for a September rate cut and sustain euro strength into the new week.
Aussie rallies to six-week high on Fed bets
The Aussie surged to 0.6588 last week, its highest since late July, before consolidating around 0.6565. The weak NFP report bolstered expectations of U.S. easing, driving broad dollar selling.
Australian dollar direction this week will be shaped by domestic sentiment surveys and Chinese economic releases.
Westpac consumer confidence and NAB business confidence are due Tuesday, while China will publish trade, inflation, and producer price data that could sway risk sentiment.
Sterling climbs above 1.35 as yields fall
Sterling closed the week higher, breaking through 1.3500 after weak U.S. jobs data sent Treasury yields tumbling.
The pound was further supported by broad dollar weakness.
UK GDP and trade data later this week will provide fresh direction for sterling traders.
Yen strengthens as dollar retreats on weak payrolls
The USD/JPY currency pair reversed sharply after trading below 147.43 last week, amid tumbling U.S. Treasury yields and heavy selling pressure on the dollar.
The Yen has since retraced much of the move to trade at 148.32 against the U.S. dollar after Prime Minister Shigeru Ishiba’s resignation heightened political uncertainty, with investors now awaiting the release of Japan’s second-quarter GDP later on Monday.
The BLS report showed weaker hiring, an uptick in the unemployment rate, and a downward revision to June’s data.
The figures reinforced bets on a Fed cut, dragging the dollar lower and fuelling safe-haven demand for the yen.
Economic outlook for the week ahead
On Monday, Japan reports current account data and GDP growth, while China releases its balance of trade figures alongside updates from the National People’s Congress. Australia will publish building permits and housing approvals.
On Tuesday, the UK releases retail sales monitor data, Australia publishes Westpac consumer confidence and NAB business confidence, and the U.S. updates Redbook sales along with annual revisions to nonfarm payrolls.
On Wednesday, South Korea posts its unemployment rate, China releases inflation and producer price index figures, and the U.S. publishes PPI and wholesale inventories.
On Thursday, Japan updates its Reuters Tankan index, PPI, and foreign bond investment, while Europe awaits the ECB interest rate decision and President Christine Lagarde’s press conference. The U.S. will release CPI and initial jobless claims.
On Friday, the UK publishes RICS house price balance, balance of trade, GDP growth, and industrial and manufacturing production data. Japan reports capacity utilisation and industrial production. Australia will hear from RBA’s Jones, while in the U.S., the University of Michigan updates consumer sentiment.
