Key facts
- U.S. job growth slowed sharply in June, with nonfarm payrolls increasing by 57,000.
- The unemployment rate fell to 4.2% in June, while the labor force participation rate dropped to a five-year low.
- The tepid jobs data has led traders to reduce expectations for a near-term interest rate increase from the Federal Reserve.
- Markets are now pricing in a 52% chance of a Fed rate hike in September, down from 64% previously.
- The U.S. dollar was on track for its largest weekly drop in nearly three months.
- The yen rallied nearly 1% in the previous session, lifting the currency from multi-decade lows.
The U.S. dollar was on track for its largest weekly drop in nearly three months as a tepid June jobs report significantly cooled market expectations for Federal Reserve rate hikes. Nonfarm payrolls increased by only 57,000 in June, well below the 110,000 forecast, while the unemployment rate fell to 4.2% and the labor force participation rate hit a five-year low. This data prompted traders to dial back expectations for a near-term interest rate increase, with markets now pricing a 52% chance for a hike in September, down from 64%. U.S. Treasury yields also pulled back. The dollar index declined, providing some relief for the Japanese yen, which rallied against the greenback. Major currencies like the euro and sterling saw gains against the dollar.