Dollar Tumbles as Labor Market Data Fuels Rate Cut Bets

The US dollar weakened against major currencies on Friday after the latest labor market data suggested a softening in employment, fueling expectations that the Federal Reserve may begin cutting interest rates as early as September.

The Bureau of Labor Statistics reported that nonfarm payrolls increased by 175,000 in April, below the 240,000 expected by economists. The unemployment rate ticked up to 3.9% from 3.8%, while average hourly earnings rose 0.2% month-over-month, slightly under the 0.3% forecast.

These figures point to a cooling labor market, which could give the Fed room to ease monetary policy. Traders quickly adjusted their rate expectations, with futures markets now pricing in a 70% chance of a rate cut at the September meeting, up from around 50% a day earlier.