Currency Markets React to Fed's Dovish Stance and Weak US Job Data

The dollar traded near its lowest point in over a year against the euro and sterling due to a dovish Federal Reserve and weak U.S. job market data. Traders are now anticipating interest rate cuts, as weekly jobless claims data and Fed Chair Powell's upcoming speech at the Jackson Hole symposium are closely watched.

The dollar hit its lowest level in more than a year against the euro and sterling on Thursday, buoyed by a dovish Federal Reserve stance and signs of a weakening U.S. job market that support the case for interest rate cuts.

The dollar sagged below the 145 yen mark as U.S. Treasury yields dropped, ahead of the release of weekly jobless claims data and Fed Chair Jerome Powell's upcoming speech at the Jackson Hole symposium. The dollar index, which measures the currency against major peers, held steady at 101.14 GMT, having dipped to 100.92 overnight, marking its first such decline this year.

Fed officials signaled a strong inclination for an interest rate cut at their September meeting, with some advocating for immediate action, according to July's meeting minutes. Meanwhile, job growth was significantly lower than initially reported, adding urgency to policy discussions. Traders now see a higher probability of a rate cut at the upcoming September meeting, based on data from the CME Group's FedWatch Tool.

(With inputs from agencies.)