Forex Today: US Dollar struggles to rebound as NFP data revive September rate cut bets
Here is what you need to know on Monday, August 4:
The US Dollar (USD) finds it difficult to gather strength against its rivals at the beginning of the week as market expectations for a 25 basis points (bps) Federal Reserve (Fed) rate cut gains traction after dismal employment data. The US economic calendar will feature mid-tier data releases on Monday.
US Dollar PRICE Last 7 days
The table below shows the percentage change of US Dollar (USD) against listed major currencies last 7 days. US Dollar was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 1.63% | 1.19% | 0.07% | 0.47% | 1.46% | 1.78% | 1.08% | |
| EUR | -1.63% | -0.46% | -1.51% | -1.15% | -0.17% | 0.14% | -0.55% | |
| GBP | -1.19% | 0.46% | -1.24% | -0.68% | 0.29% | 0.61% | -0.08% | |
| JPY | -0.07% | 1.51% | 1.24% | 0.41% | 1.34% | 1.69% | 1.15% | |
| CAD | -0.47% | 1.15% | 0.68% | -0.41% | 0.95% | 1.30% | 0.61% | |
| AUD | -1.46% | 0.17% | -0.29% | -1.34% | -0.95% | 0.31% | -0.38% | |
| NZD | -1.78% | -0.14% | -0.61% | -1.69% | -1.30% | -0.31% | -0.68% | |
| CHF | -1.08% | 0.55% | 0.08% | -1.15% | -0.61% | 0.38% | 0.68% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
The US Bureau of Labor Statistics (BLS) reported on Friday that Nonfarm Payrolls (NFP) rose by 73,000 in July, missing the market expectation of 110,000. Additionally, the BSL announced that it revised down May and June NFP increases by 125,000 and 133,000, respectively. "With these revisions, employment in May and June combined is 258,000 lower than previously reported," the press release read.
With the immediate reaction, the probability of a 25 bps Fed rate cut in September jumped above 70% from about 30% before the data, as per CME FedWatch Tool. In turn, the USD Index lost nearly 1.5% on a daily basis and erased a large portion of its weekly gains. Early Monday, the USD Index stays in a consolidation phase below 99.00. Later in the day, June Factory Orders data and second-quarter Loan Officer Survey will be watched closely by market participants.
US President Donald Trump criticized the Fed's policy decisions and called upon Chairman Jerome Powell to lower interest rates after weak jobs data. Trump also said that he fired BLS Chief Erika McEntarfer, accusing her of manipulating the numbers for political purposes. In the European session on Monday, US stock index futures rise about 0.4%, while the 10-year US Treasury bond yields rise nearly 1% on the day near 4.25% after losing 3.8% on Friday. Meanwhile, the Fed announced on Friday that Fed Governor Adriana Kugler, whose term was scheduled to end on January 31, 2026, will resign on August 8. Trump will select a new Fed governor to fill that position.
EUR/USD benefited from the renewed USD weakness on Friday and rose 1.5% on the day. Nevertheless, the pair ended the week in negative territory. In the European morning on Monday, EUR/USD trades in a tight channel above 1.1550. Sentix Investor Confidence data for August will be featured in the European economic calendar.
GBP/USD rose more than 0.5% on Friday but still registered large losses for the week. The pair holds steady early Monday and moves sideways below 1.3300.
USD/JPY fell 2.2% on Friday and registered its one of the biggest one-day losses of this year. The pair corrects higher on Monday and recovers toward 148.00.
The sharp decline seen in US T-bond yields triggered a decisive rally in Gold on Friday. XAU/USD struggles to preserve its bullish momentum early Friday but manages to hold above $3,350.
Nonfarm Payrolls FAQs
Nonfarm Payrolls (NFP) are part of the US Bureau of Labor Statistics monthly jobs report. The Nonfarm Payrolls component specifically measures the change in the number of people employed in the US during the previous month, excluding the farming industry.
The Nonfarm Payrolls figure can influence the decisions of the Federal Reserve by providing a measure of how successfully the Fed is meeting its mandate of fostering full employment and 2% inflation. A relatively high NFP figure means more people are in employment, earning more money and therefore probably spending more. A relatively low Nonfarm Payrolls’ result, on the either hand, could mean people are struggling to find work. The Fed will typically raise interest rates to combat high inflation triggered by low unemployment, and lower them to stimulate a stagnant labor market.
Nonfarm Payrolls generally have a positive correlation with the US Dollar. This means when payrolls’ figures come out higher-than-expected the USD tends to rally and vice versa when they are lower. NFPs influence the US Dollar by virtue of their impact on inflation, monetary policy expectations and interest rates. A higher NFP usually means the Federal Reserve will be more tight in its monetary policy, supporting the USD.
Nonfarm Payrolls are generally negatively-correlated with the price of Gold. This means a higher-than-expected payrolls’ figure will have a depressing effect on the Gold price and vice versa. Higher NFP generally has a positive effect on the value of the USD, and like most major commodities Gold is priced in US Dollars. If the USD gains in value, therefore, it requires less Dollars to buy an ounce of Gold. Also, higher interest rates (typically helped higher NFPs) also lessen the attractiveness of Gold as an investment compared to staying in cash, where the money will at least earn interest.
Nonfarm Payrolls is only one component within a bigger jobs report and it can be overshadowed by the other components. At times, when NFP come out higher-than-forecast, but the Average Weekly Earnings is lower than expected, the market has ignored the potentially inflationary effect of the headline result and interpreted the fall in earnings as deflationary. The Participation Rate and the Average Weekly Hours components can also influence the market reaction, but only in seldom events like the “Great Resignation” or the Global Financial Crisis.
Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
