Dollar Weakens Amid Disappointing US Jobs Report

A disappointing US jobs report has put downward pressure on the dollar, as nonfarm payrolls declined by 23 thousand in July. The figure fell short of market estimates, which predicted a gain of 80 thousand. Additionally, wage growth weakened to 3.2% year-over-year, down from a downwardly revised 3.4% in June and below the market estimate of 3.5%.

The unemployment rate did ease slightly to 4.1%, down from 4.2% in May. However, this slight improvement was overshadowed by the decline in nonfarm payrolls and weakened wage growth, which are warning signs of widening cracks in the labor market. Employers are showing more caution about hiring due to uncertainty over US tariff policy and the ongoing war with Iran.

The weak jobs report has increased the likelihood of a hold by the Federal Reserve at its September meeting. Prior to the release, there was a 45% chance of a rate hike, but that probability has now changed to a 58% likelihood of a hold and a 42% chance of a hike.