U.S. dollar retreats as soft employment report fuels rate cut wagers
The U.S. dollar weakened on Friday, as investors assessed softer-than-expected job market data, which appeared to boost the likelihood of a Federal Reserve interest rate reduction later this month.
In early U.S. trading, the dollar index -- which tracks the greenback against a basket of six currency peers -- had fallen by 0.7% and dollar index futures had slipped by 0.8%. Both were now trading down about 0.4% over the past week.
Meanwhile, the euro rose by 0.8% against the dollar and sterling strengthened by 0.8%.
The dollar stalled in recent sessions amid a raft of soft labor market readings, with job openings and unemployment claims pointing to a sustained cooling in the jobs picture.
The U.S. economy added fewer jobs than anticipated in August, possibly bolstering the case for the Federal Reserve to slash interest rates at its next policy meeting later this month.
Data from the Labor Department’s Bureau of Labor Statistics showed that nonfarm payrolls came in at 22,000 last month, down from an upwardly-revised level of 79,000 in July. Economists had estimated that the figure would stand at 75,000.
Friday’s hotly-awaited report comes as markets are widely betting that the Fed will choose to ratchet down borrowing costs at its September 16-17 gathering. According to CME’s FedWatch Tool, investors are pricing in about a 100% chance of 25-basis point rate reduction from the Fed’s current target range of 4.25% to 4.5%.
Fed officials are facing pressures to both pillars of their mandate -- keeping price growth stable and promoting maximum employment -- although recent comments from policymakers have indicated that supporting the labor market may be their current priority. Cutting interest rates can help to spur spending by businesses and consumers, albeit at the risk of pushing up lingering inflation.
Source: Investing.com
