The U.S. dollar weakened on Monday, extending its decline after last Friday’s weak jobs data strengthened expectations of a Federal Reserve rate cut this month.
At 04:15 ET (08:15 GMT), the Dollar Index fell 0.1% to 97.590, after losing more than 0.5% on Friday. The selloff came after the nonfarm payrolls report showed a sharp slowdown in job growth in August, with the unemployment rate climbing to a four-year high of 4.3%.
The Fed meets next week, and markets expect policymakers to restart their easing cycle. While most anticipate a 25-basis-point cut, investors now see a 10% chance of a larger 50-basis-point move, according to the CME FedWatch Tool.
Traders will also watch the release of the August U.S. consumer price index later this week. ING analysts said that a stronger-than-expected reading could briefly support the dollar.
Euro, Pound and French Political Risk
In Europe, the euro rose 0.1% to 1.1730, supported by data showing a 1.3% increase in German industrial output for July. However, gains remain limited by political turmoil in France.
Prime Minister François Bayrou faces a near-certain defeat in a no-confidence vote, raising concerns over the government’s ability to address rising debt. France’s budget deficit is over 5% of GDP, far above the EU’s 3% limit, and long-term bond yields recently hit levels last seen in 2009.
The British pound edged up 0.1% to 1.3520, extending Friday’s rally. ING analysts noted little U.K. economic data this week, but highlighted that next week’s Bank of England meeting and potential quantitative tightening updates could drive volatility.
Yen Under Pressure After Ishiba Resigns
The Japanese yen weakened, with USD/JPY up 0.3% to 147.80, after Prime Minister Shigeru Ishiba resigned on Sunday. His decision followed heavy election losses and party dissent, adding to political uncertainty in Japan.
Analysts said markets are now more sensitive to fiscal risks, and the yen’s decline pushed USD/JPY above 148. Still, ING expects the pair to face resistance between 148.50 and 149.00, with little chance of breaking 150 soon.
Data showed Japan’s economy grew faster than first estimated in Q2, driven by stronger consumption and inventory growth.
Elsewhere, USD/CNY held steady at 7.1325, while the Australian dollar gained 0.3% to 0.6580.
