The U.S. dollar’s been on the ropes this week. Weak job numbers, messy politics, and an uncertain future for the Fed have traders on edge. It’s not just about stats anymore—it’s about what comes next, and nobody seems sure.
Jobs Report Misses by a Mile
July’s job numbers were a letdown—only 73,000 new positions. That’s way below what folks expected. And to make things worse, earlier months got revised down by 260,000. Ouch.
The dollar tumbled fast. It dropped over 0.6% in one session, then hovered around 98.30.
Bonds? Even crazier. Short-term Treasury yields sank, as traders started betting the Fed’s going to cut rates sooner rather than later. That’s more bad news for the greenback.
Rate Cut Odds Now Sky-High
After the jobs flop, traders are nearly certain the Fed will slash rates by 25 basis points in September. There’s also a strong chance of another cut by year-end—maybe 25 to 35 bps more.
It’s been a weird year. Inflation stayed sticky for a while, so the Fed kept rates high. But now, with job growth slowing and people spending less, the Fed might not have a choice.
Still, some experts think the markets are jumping the gun. “Bonds and currencies are panicking,” one strategist said. “Stocks? Still acting like it’s all fine.”
Politics Add More Chaos to the Fed
Things are messy at the top. President Trump fired the head of the BLS—big red flag about politics messing with economic data. Then Fed Governor Adriana Kugler quit out of the blue.
Now, everyone’s waiting to see who replaces Jerome Powell as Fed Chair. Trump’s probably picking someone more willing to cut rates—which could send the dollar even lower.
One name floating around is Treasury Undersecretary John Bessent, but he says he’s happy where he is. Whoever lands the job could shape U.S. policy into 2026.
Markets are also watching who’ll take Kugler’s seat. These two roles matter—a lot.
Dollar Drops Across the Board
The dollar’s weakness is echoing everywhere:
- EUR/USD broke above $1.165, thanks to stronger eurozone data and lower energy prices.
- USD/JPY stayed steady between 147.3 and 147.8, as Japan gave off mixed signals.
- GBP/USD ticked up ahead of the Bank of England’s rate decision.
Reuters says this dollar slump might stick around—unless the U.S. economy shows signs of turning around.
Gold Flat, Bonds Flash Warnings
Gold prices barely budged. Spot gold’s sitting near $3,376. A weaker dollar usually helps gold, but everyone’s still waiting to see what the Fed does next.
Bonds are yelling, though. The 2-year Treasury yield—super sensitive to Fed moves—has taken a nosedive lately. That’s a big red flag from investors.
What’s Next?
This could be the start of a rough patch for the dollar. Key things to watch now:
- August inflation numbers—coming next week
- New jobless claims
- Trump’s Fed picks
- Moves from other central banks
Until those answers come in, expect markets to stay choppy—and the dollar to stay shaky.
Bottom Line
The dollar’s getting hammered—bad job data, politics, and Fed changes are piling on. Traders are betting on rate cuts and bracing for what’s next.
The euro, yen, and gold are getting a short-term boost, but the big question is: can the Fed pull this off without losing the markets’ trust?
As one analyst put it:
“It’s not just the numbers anymore. It’s the doubt.”
