US dollar slides as weak payrolls data shifts Fed rate outlook

The US dollar fell sharply on Thursday following a disappointing nonfarm payrolls report that signaled a cooling labor market.

The data print, which came in well below consensus expectations, immediately triggered a repricing of Federal Reserve policy expectations, with traders now pricing in a higher probability of rate cuts in the near term.

This stands in contrast to previous months where payrolls surged, such as the 115,000 jobs added in April, which had previously supported a higher-for-longer rate narrative.

The greenback weakened against a basket of major currencies as the market digested the labor weakness.

The move reflects a broader shift in sentiment toward a more dovish Fed stance, given that the unemployment rate held steady at 4.3% while job creation slowed significantly.

This stands in contrast to previous months where payrolls surged, such as the 115,000 jobs added in April, which had previously supported a higher-for-longer rate narrative.

Safe-haven assets rallied in response to the shifting rate outlook.