US Dollar Plummets Following Disappointing Jobs Report

The US dollar fell to a four-month low after a weaker-than-anticipated July employment report spurred expectations of a 50 basis point rate cut from the Federal Reserve in September. Additionally, treasury yields declined amid growing concerns about the economy's downturn. Despite the sanguine jobs data, some indicators show the slowdown might not be catastrophic.

The US dollar plunged to a four-month low on Friday, driven by a weaker-than-expected employment report for July. This development has ignited expectations for a 50 basis point interest rate cut from the Federal Reserve in September, as the economic outlook continues to deteriorate. The latest jobs data revealed employers added only 114,000 positions, falling short of the projected 175,000, with the unemployment rate climbing to 4.3%.

Market sentiment has shifted significantly. Traders now predict a 71% probability of a 50 basis point rate cut next month, up from 31% before the data's release. A minimum cut of 25 basis points is fully anticipated for September, with 116 basis points of easing expected by year's end, according to the CME Group's FedWatch Tool.

This economic data triggered a market reaction, with the dollar index dropping 1.1% to 103.21—the lowest since March 14. Treasury yields also tumbled, reflecting investor concerns. Fed Chair Jerome Powell and Chicago Fed President Austan Goolsbee have both hinted at potential rate cuts soon, though the pace remains debated. Despite the gloomy job statistics, other economic indicators do not yet signal a severe slowdown.

(With inputs from agencies.)