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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