U.S. Dollar Falls to Multi-Month Lows After Weak Jobs Data

The U.S. dollar dropped to multi-month lows against the euro and yen on Friday after data showed the labor market in the world’s largest economy slowed last month, creating fewer jobs than expected.

Fed Rate Cut Expectations Rise

The report suggested that the Federal Reserve remained on track to cut interest rates multiple times this year. U.S. rate futures on Friday priced in 78 basis points (bps) of easing this year following the nonfarm payrolls report, or about three rate cuts of 25 bps each, according to LSEG calculations. The first rate reduction is likely to resume in June.

Euro and Yen Gain Against Dollar

The euro continued its strong performance, poised for its best week in 16 years with a gain of 4.6% against the dollar, driven by Germany’s fiscal reforms. It reached a four-month peak of $1.0888 after the jobs data and was last trading at $1.0863, up 0.7%.

Against the Japanese yen, the dollar fell 0.2% to 147.65, after earlier hitting a five-month low of 147.05.

Jobs Data Highlights Economic Slowdown

Nonfarm payrolls increased by 151,000 jobs last month after rising by a downwardly revised 125,000 in January, according to the Labor Department. Economists had forecast payrolls gaining 160,000.

“Friday’s jobs report was weaker than expected, which is concerning because this report doesn’t account for the recent government job cuts from DOGE. It suggests businesses are pausing hiring until there is more certainty about tariff policy and the economic outlook,” said Glen Smith, chief investment officer at GDS Wealth Management.

Dollar Index Declines Sharply

The dollar index, which measures the greenback against six major currencies, fell 3.5% this week, its worst performance since November 2022. It dropped 0.4% on Friday to 103.72, reaching its lowest level since early November.

Market Reactions and Outlook

Investors reacted strongly to the data, with Treasury Secretary Scott Bessent stating that the U.S. economy is transitioning from public to private spending, calling it a “detox period” needed for a more sustainable balance.

Despite a temporary reprieve on tariffs targeting Mexico and Canada, the uncertainty surrounding trade policy continues to impact currency markets.

Currency Exchange Rates

The dollar’s uncertainty remains high amid mixed economic signals, and markets will closely watch upcoming Federal Reserve policy moves.