The Dollar made slight gains against the Euro and Yen but stayed close to the lows seen on Friday, as disappointing US employment data fuelled speculation about upcoming Federal Reserve rate cuts and led to a sharp decline in the greenback.
Goldman Sachs forecasts that the Fed will begin a series of three 25 basis-point rate cuts starting in September, and notes that a larger 50 basis-point cut could be on the table if the next jobs report reveals a continued rise in unemployment.
Goldman Sachs also believes the European Central Bank has likely ended its rate-cutting cycle.
Meanwhile, economists have revised up their growth projections for both the eurozone and Japan, citing the positive impact of relatively favourable trade deals. In contrast, they view Friday’s US jobs data as evidence that the American economy is teetering on the edge of stagnation, Reuters reports.
Furthermore, analysts noted that the dismissal of the Bureau of Labor Statistics (BLS) chief on Friday, along with the resignation of Federal Reserve Governor Adriana Kugler, may prompt the FOMC to reinforce its commitment to maintaining independence.
They underscored that the incoming appointee will hold only a single vote within the Federal Open Market Committee.
The Euro was last trading 0.12% lower at $1.15592 at the time of writing, slipping from Friday’s high of $1.15855.
The Dollar index, which tracks the value of the greenback against six other major currencies, stood at 98.816 after hitting a one-week low of 98.609 earlier in the session.
“Traders likely inferred that the (US jobs) report gave President Donald Trump even more justification to ‘fire’ Jay Powell,” stated Thierry Wizman, global forex and rates strategist at Macquarie Group.
“Alternatively, it gave Trump even more support for giving the Chairmanship to someone that would be more ‘structurally’ dovish,” he went on to add.
Money markets are currently pricing in a 92% probability that the Federal Reserve will lower interest rates at its upcoming meeting in September, up from 63% just a week ago.
They also suggest a total of 130 basis points in rate cuts by October 2026, 30 basis points more than the expectations on Friday prior to the release of US employment data.
The Japanese Yen slipped 0.14% to 147.3 per Dollar after minutes from the Bank of Japan’s June policy meeting revealed that some board members suggested resuming interest rate hikes if trade tensions ease.
Attention remains focused on tariff-related uncertainties, following new import duties imposed by Trump last week on numerous countries, which have fuelled concerns over the state of the global economy.