By Stefano Rebaudo and Ankur Banerjee
(Reuters) -The dollar edged up against the euro and the yen, but remained within striking distance of Friday’s lows, after weak U.S. jobs data boosted bets on Federal Reserve rate cuts and triggered a sharp selloff in the greenback.
Goldman Sachs expects the Federal Reserve to deliver three consecutive 25 basis-point rate cuts starting in September, with a 50 basis-point move possible if the next jobs report shows a further rise in unemployment.
It also sees the European Central Bank as having concluded its easing cycle.
Economists raised their growth forecasts for the euro area and Japan following relatively benign trade agreements, while arguing that Friday’s U.S. jobs report confirmed the economy is hovering near stall speed.
Meanwhile the firing of the head of the Bureau of Labor Statistics (BLS) on Friday, and the resignation of Fed Governor Adriana Kugler, could harden the views of the FOMC to ensure its independence is protected, analysts said, recalling that the new appointee will be just one vote on the Fed’s Federal Open Market Committee (FOMC).
The euro was last down 0.12% at $1.15592, after hitting on Friday $1.15855.
The dollar index, which measures the U.S. currency against six counterparts, was at 98.816, after touching a one-week low earlier in the session at 98.609.
“Traders likely inferred that the (U.S. jobs) report gave President Donald Trump even more justification to ‘fire’ Jay Powell,” said Thierry Wizman, global forex and rates strategist at Macquarie Group.
“Alternatively, it gave Trump even more support for giving the Chairmanship to someone that would be more ‘structurally’ dovish,” he added, arguing that Friday’s employment report shifted the outlook for where the Fed Funds rate target will be one year from now.
RATE CUTS
Money markets are now pricing in a 92% chance of the Fed cutting rates in its next meeting in September, compared with 63% a week earlier. They also indicate 130 bps of rate cuts by October 2026, 30 bps more than the levels seen on Friday before U.S. jobs data.
The Japanese yen was down 0.14% at 147.3 per dollar after minutes of its June policy meeting showed a few Bank of Japan board members said the central bank would consider resuming interest rate increases if trade frictions de-escalate.
The focus remains on tariff uncertainties, after the latest duties imposed on imports from scores of countries last week by Trump stoked worries about the health of the global economy.
The Swiss franc extended losses for a second day, weakening 0.1% to 0.8089 per dollar after dropping 0.5% in the previous session. However it was still above the levels seen before Friday’s economic figures, at around 0.8128.
Switzerland is looking to make a “more attractive offer” in trade talks with Washington, to avert a 39% U.S. import tariff on Swiss goods that threatens its export-driven economy.
In other currencies, the Australian dollar eased 0.05% to $0.6464, while the New Zealand dollar slipped 0.1% to $0.5898.
(Reporting by Stefano Rebaudo, Ankur Banerjee and Gregor Stuart Hunter; Editing by Sam Holmes and David Holmes)
