US Labour Market Slows Down, Weighing On Dollar And Rate Hike Expectations
The US labour market saw a significant slowdown in July, with nonfarm payrolls falling by 23k, well below the expected 80k. This unexpected decline is likely to reduce expectations for a September Federal Reserve rate hike. The weak labour-market data also weighed on the US dollar, causing it to fall against major currencies.
The NZD and AUD were among the best performers, while the euro and pound lagged due to the weaker US dollar backdrop. NZ yields moved higher in the local session on Friday, largely reflecting offshore moves, with limited domestic catalysts.
August's inflation data will be crucial for policymakers as they consider whether to raise rates in September. Markets now price around 11bp of tightening for September, down from 14bp before payrolls. The Bloomberg Dollar Spot Index fell to its lowest level since the start of June.