The US dollar fell to a four-month low on Friday. The currency came under pressure after a weaker-than-expected July jobs report raised expectations that the Federal Reserve will cut interest rates by 50 basis points in September as the economy worsens.
Employers added 114,000 jobs, below expectations for a gain of 175,000. The unemployment rate rose to 4.3%, above economists’ expectations that the rate would remain unchanged on the month at 4.1%.
Markets are now pricing in a 71% chance of a 50 basis point rate cut by the Fed in September, up from 31% before the data and 22% on Thursday.
A cut of at least 25 basis points has been fully priced in for September, with a 116 basis point cut expected by the end of the year.
The dollar index fell 1.1% to 103.21 and fell to 103.12, its lowest since March 14. It was its biggest one-day percentage drop since November.
Treasury yields also tumbled, with interest rate sensitive two-year yields dropping as low as 3.845%, the lowest since May 2023, and benchmark 10-year yields reaching a low of 3.79% for the first time since Dec. 27.
The U.S. Labor Department said that Hurricane Beryl, which made landfall in Texas on July 8, had “no discernible effect” on the jobs data, discounting one theory that may have explained the weakness.
Some economists, however, were not convinced that Beryl had no impact, and saw some spots of brightness in Friday’s jobs data. The Fed kept interest rates unchanged at the conclusion of its two-day meeting on Wednesday and Fed Chair Jerome Powell said that interest rates could be cut as soon as September if the U.S. economy follows its expected path.
Softer jobs data, a weak manufacturing report and some disappointing corporate outlooks in recent days have increased fears that the economy is worsening at a faster pace.
New economic releases will now be even more closely watched for confirmation on whether the growth outlook is as bad as feared.
Technical Outlook : U.S. Dollar Currency Index
The dollar index witnessed its biggest intraday fall since 11 November 2023. The currency plunged to 103.125 mark and traded at 103.221 down 1.07%.
On the above chart, a strong breakdown of multiple support and formation of a long bearish candlestick is indicating further weakness. For the time being immediate support is seen at 103.1550 below it currency could touch next support 102.850-102.7550. On the upside, massive resistance is seen at 104.55-104.7550.
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Commodity Samachar
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