US Dollar Slides After Softer Jobs Report Eases Fed Hike Fears

The dollar fell Friday after June's payrolls report came in below consensus, pushing EUR/USD above 1.14 and GBP/USD past 1.33. The data eased expectations that the Federal Reserve would need to resume rate increases, several traders said.

The simple read is straightforward. A softer labour market reduces the urgency for tighter policy. Lower rate expectations weigh on the dollar. That logic held through the session. EUR/USD rose 0.4% to 1.1434, while GBP/USD climbed 0.5% to 1.3349.

The better read is about positioning. The dollar had rallied through June as Fed speakers pushed back against rate-cut bets. The long dollar trade got crowded. The payrolls miss gave those positions a reason to unwind. The move was sharp but orderly, suggesting profit-taking rather than a structural shift in view.

Euro and pound buyers also had their own tailwinds. The European Central Bank has signalled it is not done tightening, and the Bank of England faces sticky inflation. Those narratives were already in place. The dollar's weakness simply gave them room to run.

What changes next depends on inflation. The July CPI report will tell the market whether the labour market softening is translating into slower price growth. If inflation stays sticky, the Fed's hawkish stance could return, and the dollar might recover. If inflation cools, the case for a September cut strengthens, and the dollar could weaken further.

For now, the dollar index sits near the lower end of its recent range. EUR/USD held above 1.1430, while GBP/USD traded near 1.3350. The next catalyst is the CPI print, due in the third week of July.