US Dollar Under Pressure as Jobs Shock Forces Repricing

The US Dollar Index (DXY) is facing downward pressure following the release of a weaker-than-expected nonfarm payrolls report, which showed a loss of 23,000 jobs in July compared to an expected increase of around 80,000.

According to the data, May and June payrolls were also revised sharply lower, from 129,000 to 63,000 and from 57,000 to 20,000, respectively. While the unemployment rate edged down to 4.1% from 4.2%, the broader picture of the labour market has become less convincing.

This leaves the Federal Reserve facing a more complicated policy equation: a labour market that is losing momentum on one side, while inflation remains above the central bank's 2% target on the other.

The shift in expectations was quickly reflected in the Treasury market, where U.S. government bond yields moved lower, with the 10-year Treasury yield falling by around 3.5 basis points to 4.637%. The market-implied probability of a September rate hike dropped from around 58% to roughly 30%, illustrating the scale of the labour-market shock.