Dollar Softens Following U.S. Jobs Data
Friday’s unexpectedly soft U.S. payrolls data continued to pressure the dollar. Nonfarm payrolls increased by 206,000 in June, slightly above forecasts, while the unemployment rate rose to 4.1%. This data has boosted expectations for the Federal Reserve to begin cutting interest rates soon.
Other Currencies Gain Ground
Sterling reached a 3.5-week high against the dollar, buoyed by the Labour Party’s recent election victory. The Australian dollar hit a six-month peak, benefiting from overall dollar weakness. The yen, while strengthening, remained above last week’s nearly 38-year low against the dollar.
Treasury Yields and Economic Outlook
U.S. Treasury yields inched higher on Monday, with the 10-year yield at 4.281% and the 2-year yield at 4.62%. Investors are now focused on upcoming economic data, particularly the June consumer price index and producer price index, for insights into inflation trends and potential Fed policy shifts.
Gold Prices Drop Despite Dollar Weakness
Gold is trading lower on Monday despite a weaker U.S. Dollar, The move is likely being fueled by profit-taking and a rise in Treasury yields.
Market Forecast
The short-term outlook for the U.S. Dollar Index appears bearish. Traders are pricing in a 76% probability of a Fed rate cut by September, up from 64% a week ago. With the dollar breaking below key technical levels and market sentiment shifting towards rate cuts, further downside for the index is likely in the near term. Traders should monitor upcoming inflation data and Fed Chairman Powell’s congressional testimony for potential market-moving catalysts.
