By Samuel Indyk and Rae Wee
LONDON (Reuters) -The U.S. dollar found some support on Monday after Friday’s dismal U.S. jobs report and President Donald Trump’s firing of a top statistics official battered the currency and prompted investors to ramp up bets of imminent Federal Reserve rate cuts.
Data on Friday showed U.S. employment growth undershot expectations in July while the nonfarm payrolls count for the prior two months was revised down by a massive 258,000 jobs, suggesting a sharp deterioration in labour market conditions.
“The report itself was perhaps not that weak but the revisions were extremely significant,” said Mohamad Al-Saraf, FX strategist at Danske Bank.
“We have a hard time seeing how the Fed cannot lower rates at the September meeting.”
Adding to headwinds for markets, Trump fired Bureau of Labor Statistics (BLS) Commissioner Erika McEntarfer the same day, accusing her of faking the jobs numbers.
An unexpected resignation by Fed Governor Adriana Kugler also opened the door for Trump to make an imprint on the central bank much earlier than anticipated. Trump has been at loggerheads with the Fed for not lowering interest rates sooner.
The barrage of developments dealt a one-two punch to the dollar, which sank more than 2% against the yen and roughly 1.5% against the euro on Friday.
The greenback recovered some of its losses on Monday, last trading 0.3% higher at 147.91 yen. Still, it was down about 3 yen from its peak on Friday.
The euro fell 0.2% to $1.1561, while sterling was little changed at $1.3276.
Trump said on Sunday he will announce a candidate to fill an open position at the Fed and a new BLS head in the next few days.
Against a basket of currencies, the dollar edged up 0.2% to 98.88, after sliding more than 1.3% on Friday.
The dollar rose 3.4% in July, its biggest monthly gain since a 5% jump in April 2022 and first monthly rise of the year, as markets became more at ease with Trump’s trade policy and economic data had remained resilient in the face of tariffs.
TREASURY YIELDS DROP AS FED CUT BETS MOUNT
The two-year Treasury yield fell to a three-month low of 3.659% on Monday as traders heavily upped bets of a Fed cut in September, while the benchmark 10-year yield strayed not too far from a one-month low at 4.2434%. [US/]
Markets are now pricing an almost 90% chance the Fed will ease rates next month owing to the weaker-than-expected jobs data, with just under 60 basis points worth of cuts expected by December, implying two quarter-point cuts and a 40% chance of a third.
“Market reactions to Friday night’s events were swift and decisive,” said Tony Sycamore, a market analyst at IG. “Equities and the U.S. dollar tumbled, along with yields.”
In other currencies, the dollar strengthened over 0.5% against the Swiss franc after Trump hit the country with some of the highest tariffs as part of the White House’s global trade reset.
The euro rose 0.3% against the franc.
“We saw the franc weakening a lot after the announcement,” Danske Bank’s Al-Saraf said.
“If these tariffs were to be sustained, the relative downside for the Swiss economy will be quite big.”
The Swiss cabinet will hold a special meeting later on Monday to discuss the next steps, and said it remains open to revising its offer to the United States.
(Reporting by Samuel Indyk and Rae Wee; Editing by Jamie Freed, Muralikumar Anantharaman and Toby Chopra)
