Dollar Drifts Lower On Rate Cut Bets
The U.S. dollar shed ground against its major counterparts on Monday with investors growing increasingly confident about a rate cut in the coming months.
It is widely expected that rates will be lower by September. According to CME Group's FedWatch Tool, the possibility of a rate cut in September is at 83.5%.
Last week's data from the Labor Department showed a smaller than expected growth in U.S. non-farm payroll employment in the month of April.
The data showed non-farm payroll employment climbed by 175,000 jobs in April after surging by an upwardly revised 315,000 jobs in March. Economists had expected employment to jump by 243,000 jobs compared to the spike of 303,000 jobs originally reported for the previous month.
The report also showed the unemployment rate crept up to 3.9% in April from 3.8% in March. The unemployment rate was expected to remain unchanged.
The annual rate of wage growth slowed to 4% in April from 4.1% in March, while economists had expected the pace of wage growth to dip to 4%.
A report from the Institute for Supply Management said the U.S. service sector activity unexpectedly contracted in the month of April, according to a report released by the on Friday.
The ISM said its services PMI dipped to 49.4 in April from 51.4 in March, with a reading below 50 indicating contraction. Economists had expected the index to inch up to 52.0.
With the unexpected decrease, the services PMI indicated activity in the sector contracted for the first time since December 2022.
The dollar index, which dropped to 104.87, recovered to 105.11, gaining marginally.
Against the Euro, the dollar was down marginally at 1.0769. The dollar weakened to 1.2596 against Pound Sterling, but recovered subsequently to 1.2562, still down from the previous close of 1.2547.
Against the Japanese currency, the dollar firmed to 153.92 yen. The dollar dropped against the Aussie, weakening to 0.6623.
The Swiss franc weakened to 0.9063 a dollar. Against the Loonie, the dollar eased to C$ 1.3666.
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