Dollar's Slide Amid Soft U.S. Jobs Report and Awaited Powell Testimony

The U.S. dollar hovered near a multi-week low against major peers following a disappointing jobs report. Traders anticipate insights on the future of interest rates from Federal Reserve Chair Jerome Powell's upcoming testimony. Meanwhile, the euro held steady despite political gridlock in France, causing fiscal concerns to ease.

The U.S. dollar remained close to a multi-week low against major peers on Tuesday, still affected by Friday's unexpectedly weak jobs report. Traders are eagerly awaiting testimony from Federal Reserve Chair Jerome Powell for guidance on potential interest rate changes.

The euro maintained stability despite Monday's sharp fluctuations, as investors adjusted to a hung parliament in France. This scenario suggests potential political gridlock but alleviates many fiscal concerns linked to extreme political outcomes. The U.S. dollar index, which assesses the greenback's value against the euro, sterling, yen, and three other major peers, stood at 104.99 in early Asian trading hours, near the overnight low of 104.80, marking a 3 1/2-week dip.

Last week, the index dropped by 0.9%, influenced by the monthly payrolls report that increased expectations of a near-term rate cut by the Fed. Traders currently estimate a 76% probability of a rate cut at the September meeting, an increase from 66% a week earlier, according to the CME Group's FedWatch Tool. Another reduction is predicted by December.

Powell is scheduled to give two days of testimony before Congress, starting with the Senate on Tuesday and the House on Wednesday. This week's consumer price data, especially recent figures indicating a decline from high levels earlier this year, will also be crucial, experts said.

"All attention will be on how Powell balances the risks between persistent inflation and unwarranted labour market deterioration," stated Ray Attrill, head of FX strategy at National Australia Bank, who forecasts the U.S. dollar's decline over the long term. Meanwhile, markets have been relatively calm regarding the French election results, viewing political gridlock—and the associated fiscal policy inertia—as the most probable and less worrisome outcome for France, according to Attrill.

The euro was nearly unchanged at $1.0827, close to Monday's almost four-week high of $1.0845, while also dipping to $1.07915 the same day. Sterling remained flat at $1.28085, after peaking at $1.28455 on Monday, its highest since June 12.

The yen remained stable at 160.91 per dollar, finding balance after rebounding from Wednesday's near 38-year low of 161.96.

(With inputs from agencies.)