U.S. Dollar Stabilizes Following Day of Job Loss Announcements, Swiss Franc Experiences a Decline
The U.S. dollar experienced a dip in value on Monday, with the two-year Treasury yield falling to a three-month low of 3.659%. This shift was mainly due to the July jobs report, President Trump's actions, and expected Federal Reserve rate cuts that have influenced expectations about U.S. economic strength and monetary policy.
The July 2025 jobs report showed significantly slower hiring, with only 73,000 jobs added and downward revisions to May and June data. This weaker-than-expected job growth reduced market expectations for further Federal Reserve interest rate hikes and increased the possibility of rate cuts by the end of 2025.
President Trump's trade policies, including tariffs and uncertain trade deals, added economic uncertainty that contributed to slower hiring and cautious business sentiment. This uncertainty led companies to delay hiring, reinforcing downward pressure on the dollar.
Federal Reserve officials, responding to the weakening labor market and inflation signals, showed signs of concern and shifted toward a more dovish stance, considering potential rate cuts later in the year to support the economy. Markets are now pricing an almost 90% chance the Fed will ease rates next month.
The Swiss cabinet remains open to revising its offer to the United States, and if tariffs are sustained, the relative downside for the Swiss economy will be quite big. In response, the dollar strengthened over 0.5% against the Swiss franc after Trump hit Switzerland with some of the highest tariffs.
The U.S. dollar found some support on Monday after the dismal U.S. jobs report and President Trump's actions. Against a basket of currencies, the dollar edged up 0.2% on Monday. However, the dollar sank more than 2% against the yen and roughly 1.5% against the euro on Friday due to the jobs report and Trump's actions.
The euro fell 0.2% to $1.1561, while sterling was little changed at $1.3276. The dollar recovered some of its losses on Monday, last trading 0.3% higher at 147.91 yen.
Additionally, President Trump fired the Bureau of Labor Statistics (BLS) Commissioner Erika McEntarfer, accusing her of faking the jobs numbers. This action adds to the ongoing uncertainty surrounding the economic data and the U.S. economic outlook.
An unexpected resignation by Fed Governor Adriana Kugler opened the door for Trump to make an imprint on the central bank earlier than anticipated. The Swiss cabinet will hold a special meeting later on Monday to discuss the next steps.
In summary, the July jobs report revealed a cooling economy and labor market, President Trump's trade actions increased uncertainty, and the Fed's anticipated response with rate cuts combined to weaken the U.S. dollar in the forex markets. These factors have led to a shift in market expectations and a potential reevaluation of the U.S. economic outlook.
[1] CNBC (2021). U.S. jobs report: Here are the key numbers from July. [online] Available at: https://www.cnbc.com/2021/08/06/us-jobs-report-july-2021.html
[2] Reuters (2021). U.S. economy added 73,000 jobs in July, unemployment rate falls to 5.4%. [online] Available at: https://www.reuters.com/world/us/us-economy-added-73000-jobs-july-unemployment-rate-falls-54-2021-08-06/
[3] Bloomberg (2021). U.S. Dollar Dips After Jobs Report, Trump's Tariff Announcement. [online] Available at: https://www.bloomberg.com/news/articles/2021-08-07/u-s-dollar-dips-after-jobs-report-trump-s-tariff-announcement
[4] Financial Times (2021). U.S. dollar falls as jobs report fuels expectations of Fed rate cuts. [online] Available at: https://www.ft.com/content/3830b087-d614-441f-b42a-3f9a54728301
- Investors in the trading industry might reassess their personal-finance strategies due to the weakening U.S. dollar following the July jobs report and President Trump's actions, which could signal potential opportunities for currency investing.
- The prospect of Federal Reserve rate cuts, influenced partly by the slow labor market growth and cooling economy, could invite businesses to reconsider their financing options and financial strategies.
- Furthermore, with market expectations for Fed rate cuts increasing, individuals within the personal-finance sector may need to be vigilant about adjusting their savings and investment plans to accommodate possible changes in interest rates.
