DXY Slides to 99.45 on Shock July Payrolls Contraction

The Dollar Index closed at 99.4540, down 0.30%, after Friday's US July jobs report landed well short of forecasts. Nonfarm payrolls fell 23,000 versus estimates that ranged roughly 80,000 to 95,000 across desks, while average hourly earnings rose just 0.1% month-on-month against a 0.3% forecast. June payrolls were also revised down to a 20,000 gain from an initially reported 57,000. Fed's Barkin said the economy is in what he called 'a zero-to-modest gain jobs environment.' The broad dollar reaction was reinforced by easing oil prices, which desks read as supportive of moderating inflation elsewhere.

US Treasury yields eased across most of the curve on the day: the 5-year fell 2.7bp to 4.362%, the 3-month fell 2.2bp to 3.710%, the 10-year slipped 1.0bp to 4.660%, and the 30-year edged down 0.2bp to 5.211%. The 20+ Year Treasury ETF rose 0.30% to 82.73. The Fed funds target remains 3.50-3.75%, with the live policy question through mid-2026 centered on whether the Fed hikes further. Friday's weak payrolls print cut expectations for additional tightening, with desks describing pared Fed rate-hike bets and reduced tightening expectations. The New York Fed's survey showed one-year inflation expectations dipped to 3.6% from 3.7%.

EUR/USD rose 0.30% to 1.1558, a fresh seven-week high, as the weak payrolls print and easing oil prices weighed on the dollar. GBP/USD gained 0.28% to 1.3492, having touched toward $1.350 -- its highest since July 15 -- before fading, with a hawkish Bank of England hold also underpinning sterling. USD/JPY fell 0.43% to 157.77 as the soft jobs data pared Fed rate-hike bets, adding to yen strength built earlier in the week. USD/CAD dropped 0.54% to 1.3937 as US dollar weakness combined with a much stronger than expected Canadian July employment report, +75,100 versus a roughly 15,000 forecast.

Sterling was Friday's standout mover into the weekend, rising toward $1.350 -- its highest level since July 15 -- before fading to close near 1.348 (broker-quoted 1.3492, +0.28%). The move was entirely dollar-driven: July's -23,000 nonfarm payrolls print, against roughly 80,000-95,000 expected, cut expectations for further Fed tightening and triggered broad dollar selling. On the UK side, the Bank of England held Bank Rate at 3.75% on July 30 for a fifth straight meeting, voting 6-3, with Huw Pill, Megan Greene and Catherine Mann dissenting in favour of a hike to 4% -- reported as a 'hawkish hold.' Sterling's rally stalled twice near $1.350 on Friday without breaking cleanly higher. Monday's calendar is light, with no tier-1 UK data or Bank of England speakers scheduled.

Monday, August 10 calendar is thin. From Japan: the BoJ's Summary of Opinions from the July 30-31 policy meeting is due, alongside the Economy Watchers Survey (Current Conditions). No major eurozone data or ECB speakers are scheduled, and the UK calendar carries no tier-1 releases or Bank of England speakers. Canada has no Bank of Canada events on the docket; its next rate decision isn't until September 2. Looking ahead, Wednesday, August 12 brings Germany's final HICP estimate, US CPI, and Canadian building permits for June -- the next data likely to move the dollar broadly.