Dollar Plummets as Weak Payroll Report Cuts Rate Hike Chances

The dollar plummeted to a 7-week low on Friday after the US July payroll report showed an unexpected decline in nonfarm payrolls and a smaller-than-expected increase in average hourly earnings.

The report revealed that US July nonfarm payrolls unexpectedly fell by -23,000, weaker than expectations of +80,000. This marked the first decline in 5 months.

The dollar's decline also curbed liquidity demand for the currency, which is seen as a dovish factor for Fed policy.

As a result, the markets are now discounting a 44% probability of a +25 bp rate hike at the next FOMC meeting on September 15-16, down from 58% before the report.