US Dollar Slumps on Disappointing May Jobs Report

The US dollar slumped at the end of the trading week, driven by a weaker-than-expected May jobs report and stagnant wage growth that signaled a slowing economy. Should the trend continue, then it might prompt the Federal Reserve to cut interest rates to spur economic growth, which the market is already betting will happen as early as next month.

According to the Bureau of Labor Statistics (BLS), the US economy created just 75,000 new jobs in May, below the median estimate of 185,000. The government also revised its April jobs report downwards from 263,000 to 224,000 and March’s gain was slashed from 189,000 to 153,000.
Most of the hiring took place in professional and business services and healthcare. The government and retailers reduced their payroll numbers last month.
The unemployment rate remained unchanged at a 49-year low of 3.6%.
The average hourly wage rose just six cents to $27.83 per hour. But the 12-month rate of hourly wage gains fell from 3.2% to 3.1%.
Indeed, this will disappoint investors because the pace of hiring has slowed since the end of 2018. That said, the job market is still the healthiest it has been in decades and continues to roar when compared to past bull markets.
For the last few weeks, markets have been anticipating that the Federal Reserve will cut interest rates from the current target range of 2.25% to 2.50%. The central bank initially dismissed these expectations, but Fed officials have become increasingly open to the idea. Fed Chair Jerome Powell indicated an openness to cutting rates, according to the latest minutes from the most recent Federal Open Market Committee (FOMC). St. Louis Fed Bank President James Bullard says a rate cut may be warranted due to low inflation and trade wars.
While a rate reduction is not being penciled in for this month’s FOMC policy meeting, CME Group FedWatch tool data is showing the market is projecting a rate cut as early as July. Some in the market believe rates could slide to as low as 1.00% by December.
The US Dollar Index cratered 0.41% to 96.65.
The USD/CAD currency pair tumbled 0.41% to 1.3305, from an opening of 1.3362, at 12:57 GMT on Friday. The EUR/USD rose 0.35% to 1.1317, from an opening of 1.1276.

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