By Samuel Indyk and Gertrude Chavez-Dreyfuss
In a rather eventful turn of events, the U.S. dollar regained some poise on Monday following a tumultuous Friday. The dollar faced pressure due to several notable developments, including a disappointing U.S. jobs report and changes in key personnel.
Market Observations and Reactions
Karl Schamotta, a strategic mind at Corpay, noted that while July’s boost for the dollar hit a snag, strong corporate earnings are still overshadowing labour market worries and other economic threats. Critical focus remains on who President Trump will appoint to lead both the BLS and the Fed.
Changes in Key Personnel
President Trump, always one for a bit of drama, fired Erika McEntarfer, head of the Bureau of Labor Statistics, accusing her of manipulating employment numbers. This paved the way for fresh appointments, with Trump promising new names in the coming days.
Additionally, Fed Governor Adriana Kugler’s unexpected resignation has given Trump an opening to shape the central bank more closely aligned with his economic stance. It came as no shock, then, that market bets increased for imminent Fed rate cuts.
U.S. Employment Data
The most recent figures on U.S. employment were disappointing. July’s growth lagged behind expectations. Moreover, revisions for the preceding months revealed a huge overestimation by 258,000 jobs, reflecting a troubling trend in the labour market.
Currency Movements
Friday saw the dollar plummet over 2% against the yen and about 1.5% against the euro. However, come Monday, the greenback steadied at 147.32 yen. The euro, meanwhile, slid to $1.1562, and sterling was much unchanged at $1.3281.
| Currency | Description | RIC | Last | U.S. Pct | YTD Pct | High | Low |
|---|---|---|---|---|---|---|---|
| Dollar | 98.745 | 0.1% | -8.98% | 98.982 | 98.5 | ||
| Euro/Dollar | 1.1571 | -0.13% | 11.76% | $1.1597 | $1.1 | ||
| Dollar/Yen | 147.14 | -0.18% | -6.48% | 148.08 | 146. | ||
| Sterling/Dollar | 1.3287 | 0.07% | 6.24% | $1.3331 | $1.3 |
Other currencies saw varied movements. The dollar climbed over 0.6% against the Swiss franc, fuelled by Trump’s new tariffs against Switzerland. The euro nudged up 0.4% against the Swiss currency.
Treasury Yields and Speculations
Treasury yields, too, reacted to these developments. The two-year Treasury yield dropped to a three-month low of 3.659%, reflecting growing expectations of a Fed rate cut. Market indicators from CME’s FedWatch show an 84% probability of a Fed rate decrease next month.
Further Implications
The overarching mood suggests that pouring into U.S. financial markets remains steady. Demand for safe-haven currencies is consistent, waiting as the political and economic narrative continues to unfold. Market watchers are curious to see the onward trajectory of Trump’s appointments and ensuing financial policies.
(With insights from Samuel Indyk in London and Gertrude Chavez-Dreyfuss in New York. Additional observations by Rae Wee in Singapore. Editorial tampering by Toby Chopra and Mark Potter)
