**US Dollar Price Forecast: Greenback Slips Following Disappointing Jobs Data**
*Based on the original article by Christopher Lewis, FX Empire*
The US dollar experienced downward pressure this week after weaker-than-expected employment data cast doubts on the strength of the American labor market. As investors digest the latest economic developments, the greenback is trending lower against several major currencies, particularly the British pound and the euro. This development adds uncertainty to the Federal Reserve’s monetary policy outlook and reshapes expectations for interest rates through the coming months.
This extended analysis builds upon the original article by Christopher Lewis published by FXEmpire.com, while providing broader context and more in-depth insights into what this means for currency traders.
**Overview of the Situation**
– The US dollar fell against both the British pound (GBP) and the euro (EUR) following a disappointing US jobs report.
– The data signaled slowing job growth and may encourage the Federal Reserve to adopt a more dovish stance in the near term.
– Traders are recalibrating expectations for interest rate cuts before the end of 2024.
– Recent PMI data also highlights uneven recovery trends across global economies, adding further volatility to forex markets.
**Employment Data Pulls Dollar Lower**
The catalyst for the dollar’s recent weakness stems from the US ADP Non-Farm Employment Change figures released earlier this week. The data revealed:
– Private sector employment increased by only 150,000 jobs in June, below the consensus estimate of approximately 160,000 to 170,000.
– The figure represents a slight cooling of the labor market and raises concerns about whether the strong economic growth seen earlier in 2024 will continue.
Despite not being as closely followed as the official non-farm payrolls report from the Bureau of Labor Statistics, the ADP report acts as an indication of labor market conditions and typically influences investor sentiment in the forex and bond markets.
A slowdown in hiring often suggests reduced consumer spending power and lower demand, which in turn can lead to decreased inflationary pressure. This dynamic may push the Federal Reserve closer to considering monetary policy easing.
**Federal Reserve Policy Outlook**
The Fed remains highly sensitive to incoming economic data, especially labor statistics and inflation expectations.
– The Federal Reserve has emphasized a data-dependent stance.
– Any sign of weakness in job creation, wage growth, or core inflation could increase the likelihood of rate cuts within the next two quarters.
– Current futures markets suggest approximately a 60 percent chance of at least one rate cut by the Fed before year-end, with probabilities rising after the weak jobs data release.
Fed Chair Jerome Powell has repeatedly stated that while the inflation fight is not over, the central bank will not hesitate to adjust its policy if economic conditions warrant it.
If jobs and inflation data continue to soften, markets may begin to price in two rather than just one interest rate cut by December.
**Currency Market Reactions**
The U.S. dollar index (DXY), which measures its performance against a basket of major currencies, declined after the release of the employment report. Specific pairs show distinct price action:
1. **EUR/USD**
– The euro strengthened against the dollar, climbing close to the 1.08 level.
– At one point, the pair tested resistance around 1.0810, showing bullish momentum.
– If the uptrend continues, the next resistance is seen near the 1.0850 mark.
– Support lies around 1.0750, and a break below could bring a return to the 1.07 support area.
2. **GBP/USD**
– The British pound gained ground as well, trading above 1.27 in intraday movements.
– Bullish momentum in GBP/USD may be supported by expectations of the Bank of England delaying rate cuts until Q4, contrasting with rising bets on Fed loosening.
– Resistance can be seen near 1.2740–1.2760. A
Read more on EUR/USD trading.