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The dollar fell sharply today, hitting a four-month low, based on statistics on U.S. labor market developments in July. The analyst report reinforced expectations that the Federal Reserve will cut interest rates by half a percentage point in September.
Shortly after 5:00 pm CET, the dollar index, which expresses the value of the greenback against a basket of six major world currencies, fell 1.2% to 103.21 points. It fell to 103.16 points on the day, its lowest since March 14. At the same time, it was the biggest one-day drop since November last year. The euro appreciated 1.2% against the dollar to $1.0918, while the dollar depreciated 1.9% against the yen to 146.48 yen.
The U.S. economy created about 114,000 new jobs in July, significantly lower than expected. The U.S. unemployment rate unexpectedly rose to 4.3% from 4.1% in June. This is the highest level since October 2021.“That’s the fear of growth. The market is now realizing that the economy is really slowing down,”said Wasif Latif, an analyst at Sarmaya Partners.
According to CME’s FedWatch tool, investors now see a 71% chance that the Fed will cut rates by half a percentage point in September. Before today’s labor market statistics, investors saw a 31% chance of a half-point rate cut, compared with 22% on Thursday. A rate drop of at least a quarter percentage point is fully priced in. By the end of the year, rates are expected to fall by more than a percentage point, Reuters writes.
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