FX.co ★ US Dollar Declines after Jobs Report

On Friday, the US Dollar Index declined to 97.7, influenced by the decrease in short-term Treasury yields following signs of a significant downturn in the labor market. This scenario raised concerns about the US economy and bolstered expectations for several interest rate reductions by the Federal Reserve. In August, only 22,000 nonfarm payrolls were added, a stark contrast to the anticipated increase of 75,000, and the unemployment rate rose to a near four-year high of 4.3%. This discouraging data aligns with recent dovish comments from members of the Federal Open Market Committee (FOMC), who suggested that interest rates should be adjusted in response to the slowing economy and labor market. It is now anticipated that the central bank will initiate its rate-cutting cycle this month, resulting in three total cuts this year. In contrast, the Eurozone experienced sustained employment growth and an uptick in inflation, leading rate traders to predict no further rate cuts by the European Central Bank (ECB) this year, thereby strengthening the euro, the largest component of the US Dollar Index (DXY).