The U.S. dollar is facing pressure in the currency markets after a soft jobs report and political uncertainty in France. The euro managed to hold its ground, despite sharp swings following a hung parliament in France, which indicates potential political gridlock. This outcome removes concerns about far-right or leftist victories that could have impacted fiscal policies. As a result, the U.S. dollar index remains near a multi-week low against major peers, trading at 104.99 in early Asian hours.
Following the disappointing jobs report, traders are closely watching Federal Reserve Chair Jerome Powell’s testimony for clues on the future path of interest rates. The FedWatch Tool indicates a 76% probability of a rate cut at the September meeting, up from 66% the previous week. This sentiment was further exacerbated by the monthly payrolls report, which raised expectations of rate cuts in the near future. Market participants are also awaiting consumer price data later in the week to gauge inflation trends.
Market strategist Ray Attrill anticipates a decline in the U.S. dollar over the longer term, as Chair Powell addresses the balance between inflation and labor market conditions. Despite concerns about the impact of political gridlock in France, market sentiment remains relatively calm. The euro is trading near a four-week peak at $1.0827, while sterling remains strong at $1.28085. The yen has stabilized at 160.91 per dollar after a recent rebound.
Overall, the currency markets are reacting to a combination of political uncertainty and interest rate expectations. Traders are closely monitoring developments in France and the upcoming testimony from Chair Powell for insights into future economic conditions. The dynamic nature of the market is reflected in the fluctuating values of major currencies against the backdrop of evolving geopolitical and economic factors.