US Dollar Falls to Multi-Month Lows Against Euro and Yen
Labour Market Data Suggests Rate Cuts Ahead
The US dollar dropped to multi-month lows against the euro and yen on Friday, extending its losses after data showed the labour market in the world’s largest economy slowed last month, creating fewer jobs than expected.
Rate Cuts Expected
The report suggested that the Federal Reserve remained on track to cut interest rates multiple times this year. US rate futures on Friday priced in 78 basis points (bps) of easing this year, or about three rate cuts of 25 bps each, according to LSEG calculations.
First Rate Reduction Expected in June
The first rate reduction is likely to resume in June.
Fed Chair Powell’s Comments
Fed chair Jerome Powell, in prepared remarks to the University of Chicago School of Business, did not really say anything new, repeating comments during his testimony before Congress and his press conference after the Fed rate decision in January. He said that the Fed will be in no rush to cut rates while it waits for more clarity on how policies of the new Trump administration affect the economy.
Euro Soars to Four-Month High
The euro, on the other hand, continued its winning ways, poised for its best week in 16 years with a gain of 4.5 per cent against the dollar, boosted by Germany’s game-changing fiscal reforms. It hit another four-month peak of $1.0888 after the jobs data.
Dollar Falls Against Japanese Yen
Against the Japanese currency, the greenback was flat on the day at 147.99 yen, after earlier falling to a five-month low of 146.94 yen.
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Dollar Index Falls 3.5% This Week
The dollar index, which measures the greenback’s value versus six major currencies, has fallen 3.5 per cent during the week, on track for its worst weekly performance since November 2022. It fell 0.4 per cent on Friday to 103.81, after earlier sliding to its lowest since early November.
Economists Weigh In
Natalia Lojevsky, managing director at CIFC Asset Management, with $44 billion in assets under management, thinks "the softer average hourly earnings is probably a relief for the Fed, who continue to evaluate inflationary pressures both in the labour market and broader economy as a result of the yet uncertain trade and tariff policy."
Conclusion
It has been a volatile week for the currency market, driven mainly by US trade and economic growth uncertainties and a pivotal development in Europe as its largest economy abandoned its fiscal constraints to boost spending and revive growth.
FAQs
Q: What is the current state of the US dollar?
A: The US dollar has fallen to multi-month lows against the euro and yen.
Q: What is the expected outcome of the Federal Reserve’s interest rate decisions?
A: The Federal Reserve is expected to cut interest rates multiple times this year.
Q: What is the current state of the euro?
A: The euro has gained 4.5 per cent against the dollar this week, poised for its best week in 16 years.
Q: What is the current state of the Japanese yen?
A: The Japanese yen is down 0.4 per cent against the US dollar on Friday.
Q: What is the current state of the dollar index?
A: The dollar index has fallen 3.5 per cent this week, on track for its worst weekly performance since November 2022.
