The U.S. dollar regained some footing on Tuesday, recovering slightly after sliding in response to disappointing U.S. payroll data. Market participants are now weighing the likelihood of interest rate cuts by the Federal Reserve amid signs of economic deceleration.
As of 04:15 ET (08:15 GMT), the Dollar Index—tracking the greenback against a group of six major currencies—rose 0.2% to 98.765, bouncing off a one-week low hit earlier in the session.
Payroll Data Weighs, But Dollar Finds Support
Friday’s weaker-than-expected July jobs report triggered a sharp selloff in the dollar, as traders swiftly adjusted their expectations for monetary policy.
According to the CME FedWatch tool, the odds of the Federal Reserve lowering rates at its September meeting surged above 90%, a significant jump from the 63% probability priced in just a week earlier.
Goldman Sachs now projects that the Fed will initiate a series of three 25-basis-point rate cuts beginning in September. The investment bank also noted that “a 50 basis point move [is] possible if the unemployment rate climbs further in the next report.”
Adding to dovish expectations, San Francisco Fed President Mary Daly commented on Monday that weakening labor market signals and the absence of inflationary pressure from tariffs have shifted the risk outlook. She said, “given mounting evidence the U.S. jobs market is softening and no signs of persistent tariff-driven inflation, the risks are now skewed to more than two Fed cuts this year.”
Investors will also be eyeing the U.S. ISM services index for July, due later Tuesday. Analysts at ING noted in a client note: “For today, the U.S. focus is on the ISM services figure for July. A mild improvement is expected and could give the dollar a nudge higher.”
On a broader level, concerns about global trade continue to simmer. Fresh tariffs imposed last week by President Trump on imports from multiple nations have added to fears about the strength of global growth.
Euro Pressured by French Services Contraction
In Europe, the euro slipped, with EUR/USD down 0.3% to 1.1544 after weaker-than-anticipated economic data from France.
The latest HCOB France Services PMI came in at 48.5 for July, down from 49.6 in June, indicating a faster contraction and marking the sharpest decline since April. Political tension and subdued demand are eroding business confidence.
The eurozone’s June producer price index is due later Tuesday and is forecast to rise 0.6% year-on-year. The muted inflation outlook is likely to keep the European Central Bank on alert for downside risks to its 2% target.
“EUR/USD looks quite comfortable near the 1.1550 level and, in the absence of market drivers, may hang around that level for a while. We imagine buyers would return in the 1.1500/1520 area should the U.S. data weigh on EUR/USD today,” said ING.
Sterling was also slightly lower, with GBP/USD easing 0.1% to 1.3277, remaining within a narrow trading band.
Indian Rupee Hits Record Low on Trade Tensions
Elsewhere, USD/JPY edged 0.1% higher to 147.25, buoyed by stronger-than-expected services PMI figures out of Japan.
The Australian dollar ticked up 0.1% to 0.6468, while USD/CNY rose 0.1% to 7.1856 even as Chinese services PMI data outperformed expectations.
The Indian rupee came under sharp pressure, with USD/INR climbing 0.2% to 87.800 after reaching a new all-time high. The currency was rattled by President Trump’s threats of steep tariffs on India in retaliation for its purchases of Russian oil.
Last week, Trump announced a 25% tariff on Indian imports and warned of even tougher penalties ahead.
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