Dollar Slides as Shock July Payrolls Miss Rattles Fed Bets

The US Dollar Index closed Friday, August 7 at 99.4090, down 0.35% on the session — the last completed trading session before the weekend close (FX markets are now shut through Saturday and Sunday). The move came after the Bureau of Labor Statistics' July payrolls report: nonfarm payrolls fell 23,000 against a +80,000 forecast, June was revised down to a 20,000 gain from +57,000, and the unemployment rate eased to 4.1% from 4.2% even as labor-force participation slipped to a five-year low. Desks describe the reaction as a broad dollar sell-off tied to reassessed Fed policy odds. Friday's drop reversed the prior session's firmer tone (+0.30%), making this a single-session snap rather than a confirmed multi-day trend.

Friday's July payrolls miss scrambled Fed policy bets. Nonfarm payrolls fell 23,000 versus a +80,000 forecast, June was revised down to +20,000 from +57,000, and unemployment eased to 4.1% from 4.2% even as participation fell to a five-year low. Desks described the move as markets unwinding bets on a September Fed rate hike, with some also flagging rising odds of a cut instead. Treasury yields eased modestly: the 10-year fell 2.1bp to 4.649%, the 5-year fell 3.5bp to 4.354%, the 30-year fell 0.7bp to 5.206%, and the 3-month fell 1.4bp to 3.718%. The New York Fed survey showed one-year inflation expectations easing to 3.6% from 3.7%. Fed's Barkin characterized the backdrop as a zero-to-modest gain jobs environment. Trump said a rate-hike decision isn't completely up to Warsh, but up to the Board.

EUR/USD: rose to 1.1561 (+0.32%) Friday, a roughly two-month high per desk commentary, as the payrolls miss weighed on the dollar. GBP/USD: closed at 1.3495 versus Thursday's 1.34538 (+0.31%), rallying toward 1.3500 after the jobs data before paring gains into the close. USD/JPY: fell to 157.49 (-0.61%), extending its pullback as JGB yields sat near multi-decade highs, narrowing the US-Japan yield gap and prompting carry-trade unwinding. USD/CAD: fell 0.54% to 1.3937, an eight-week high for the loonie, after Canadian July employment jumped 75,100 versus +15,000 expected and unemployment fell to 6.4%, a two-year low.

EUR/USD rose from about 1.1524 to 1.1561 on Friday's close, +37 pips (+0.32%), a roughly two-month high. That followed a softer Thursday session (-0.30%), so it reads as a single-session snap rather than an established trend. The driver was the July payrolls miss — nonfarm payrolls at -23,000 versus +80,000 expected — which reset Fed policy expectations and weighed broadly on the dollar. Separately, Bloomberg (citing the FT) reported the ECB was not told in advance that the US Treasury sold euros, not dollars, to fund the joint US-Japan yen intervention executed July 31; some senior ECB officials reportedly called it "an unprecedented breach of longstanding conventions." Lagarde and Treasury Secretary Bessent discussed the trade August 1; Bessent called it "just a reallocation of our reserves" on August 4. No major eurozone data is confirmed for Monday; US CPI follows Wednesday, August 12.

Saturday, Aug 8: FX markets are closed for the weekend. On the calendar, FOMC Member Bowman's speech at 02:45 has already been delivered. China's July CPI y/y (forecast 0.8%, previous 1.0%) and PPI y/y (forecast 3.9%, previous 4.1%) are due at 11:30, both low-impact. Looking to Monday, Aug 10: no confirmed major eurozone or UK releases, no major Canadian data, and no BoE speakers identified; Japan's Economy Watchers Survey and the US Conference Board Employment Trends Index are on the slate. The bigger risk events remain later in the week: US CPI on Wednesday, Aug 12, and UK GDP alongside US PPI on Thursday, Aug 13.