Dollar Slumps as US Jobs Report Fails to Deliver

The US Dollar took a sharp hit against the euro and Pound Sterling after Friday's surprise contraction in US payrolls weakened the case for a September Federal Reserve rate hike.

The July jobs report showed nonfarm payrolls fell by 23,000, well short of the 80,000 increase expected by economists. This was also accompanied by downward revisions to prior months, leaving the three-month average near 20,000.

Average hourly earnings rose just 0.1% on the month and 3.2% over the year, which has eased concerns that the labour market is generating significant inflationary pressure.

The jobs data has tilted the balance away from an imminent rate hike and toward a more cautious policy path. The probability of a Federal Reserve rate increase at the September meeting has fallen noticeably as traders scaled back expectations for tighter policy.