USD Weakens as NFP Misses Expectations, Rate Hike Odds Plummet

The US Dollar weakened sharply on Friday after a much weaker-than-expected US employment report. The Bureau of Labor Statistics (BLS) data showed that Nonfarm Payrolls (NFP) declined by 23K in July, compared with market expectations for an increase of 80K jobs.

Previous months were also revised sharply lower, with June payrolls revised down from 57K to 20K and May from 129K to 63K. This resulted in a combined downward revision of 103K jobs.

The Unemployment Rate edged down to 4.1% from 4.2%, while the Labor Force Participation Rate slipped to 61.4% from 61.5%. Annual Average Hourly Earnings growth slowed to 3.2% from a downwardly revised 3.4% in June.

The US Dollar's weakness led to a sharp decline in bets that the Federal Reserve (Fed) will tighten monetary policy, with the chance of a 25-basis-point rate hike at the September meeting falling to just 44%, down from 55% a day earlier and 67% a week ago.