The US Dollar (USD) experienced broad weakness against major currencies following the release of disappointing US Nonfarm Payrolls (NFP) data for June. The US economy added only 57,000 jobs, significantly missing the consensus estimate of 110,000, while the previous month's figure was revised down from 172,000 to 129,000. The unemployment rate edged lower to 4.2% from 4.3% [1][2][4]. This soft labor report led traders to scale back expectations for a Federal Reserve (Fed) rate hike, with the probability of a September hike dropping to 52% from 66% prior to the data release, according to the CME FedWatch tool [2][4][5]. Fed Chair Kevin Warsh reiterated the central bank's commitment to a 2% inflation target at the ECB Forum in Sintra, noting that inflation remains 'too high' but did not provide guidance on future rate decisions [2][4].
The USD/CAD pair turned lower for the second consecutive day, with spot prices near mid-1.1400s, as the Canadian Dollar (CAD) benefited from both the weaker USD and an uptick in oil prices. Iran's warning regarding US interference in the Strait of Hormuz supported crude oil prices, further underpinning the CAD. Traders shifted expectations for Fed rate increases in 2026 from one to two hikes to between zero and one hike, reflecting the changed outlook [1]. Meanwhile, the Indian Rupee (INR) gained ground against the USD, with the USD/INR pair dropping to near 95.26. Lower oil prices, which stabilized after falling over 20% in June, also supported the INR, as India relies heavily on oil imports [2]. Foreign Institutional Investors (FIIs) remained net sellers in the Indian stock market, but the pace of selling slowed as oil prices returned lower [2].
The Swiss Franc (CHF) rose as USD/CHF extended losses for the second day, trading around 0.8020. The cooling US labor market prompted Wall Street to aggressively rethink its interest rate outlook. Switzerland's consumer prices rose 0.5% year-on-year in June, meeting forecasts but slowing to their lowest reading since March [4]. The British Pound (GBP) gathered strength against the USD, with GBP/USD trading around 1.3360. Natixis analysts highlighted that Andy Burnham's commitment to fiscal discipline offers near-term support for the GBP, though future UK budgets will be closely monitored for any relaxation of fiscal rules [5].
EUR/USD traded cautiously higher near mid-1.1400s, poised to register gains for the first time in three weeks as receding Fed rate hike bets kept the USD depressed. Technical indicators for EUR/USD and GBP/USD suggested mildly positive momentum, but both pairs faced resistance at key moving averages and Fibonacci levels [6][5]. The USD was the weakest against the New Zealand Dollar and lost ground against most major currencies, as shown in the daily and weekly heat maps [3][6].
India's HSBC Composite PMI for June was revised down to 57.1 from 57.4, missing estimates, while the Services PMI came in at 57.4, above the previous reading but below consensus. The PMI data had little impact on the INR, with USD/INR losing 0.23% on the day to 95.25 [3].
CONCLUSION
The US Dollar's sharp decline across major currencies was driven by weaker-than-expected US jobs data and reduced Fed rate hike expectations. Commodity-linked currencies like the CAD and INR benefited from oil price movements, while the CHF and GBP also strengthened. Market sentiment remains negative for the USD, with traders and analysts closely watching upcoming economic data and central bank signals for further direction.