US Dollar Retreats as Weak Payrolls Data Shift Federal Reserve Policy Expectations

Key Facts

In a move reflecting a sudden shift in the U.S. labor market, the U.S. Dollar faced significant selling pressure against major currencies. According to reports, the U.S. economy lost 23,000 jobs in July, starkly missing analyst forecasts of an 80,000-job gain. This sharp decline in Non-Farm Payrolls data has led traders to begin reducing their bets on a continued hawkish monetary policy stance from the Federal Reserve.

This retreat coincided with the unemployment rate declining to 4.1% in July from 4.2% in June, amid a slight decrease in the labor participation rate. Per market data, major currency pairs reacted positively to the greenback's weakness, with EUR/USD testing new resistance levels while GBP/USD moved above the 1.3500 mark. U.S. Treasury yields also softened, with the 10-year yield settling near 4.65%, further compounding the downward pressure on the American currency.

Looking at current levels, the U.S. Dollar Index is testing support levels at 99.25 and 98.60, as of the August 7, 2026 close. Investors should monitor upcoming economic catalysts for further direction; the economic calendar highlights inflation data from South Korea and Turkey, as well as the Bank of Japan's monetary policy meeting minutes on August 4, which could further impact global risk sentiment.