A Jobs Report That Shook Markets

The U.S. dollar found tentative footing on Monday after a brutal sell-off triggered by Friday’s dismal jobs report and a sudden political upheaval. The latest employment figures revealed not only weaker-than-expected job growth in July but also staggering downward revisions for May and June—a combined loss of 258,000 jobs. This sharp deterioration in labor market conditions has all but cemented expectations of Fed cuts as early as September.

According to Yahoo Finance, traders are now pricing in a near-certain probability (over 95%) of a rate cut next month, with markets anticipating more than 63 basis points of easing by year-end. "The Fed can no longer ignore the cracks in the labor market," said David Doyle of Macquarie Group. "We expect a 25-basis-point cut in September."

Political Turbolence Adds Fuel to the Fire

If the jobs data alone weren’t enough to rattle investors, President Donald Trump’s abrupt firing of Bureau of Labor Statistics Commissioner Erika McEntarfer injected further chaos. Accusing her of manipulating employment figures, Trump’s move cast doubt on the reliability of future economic reports—a critical input for Fed policy decisions.

Meanwhile, the unexpected resignation of Fed Governor Adriana Kugler opened the door for Trump to reshape the central bank’s leadership sooner than anticipated. With the president publicly feuding with the Fed over delayed Fed cuts, the timing of Kugler’s departure raises questions about political interference in monetary policy.

"Market reactions to Friday night’s events were swift and decisive," said IG analyst Tony Sycamore. "Equities and the U.S. dollar tumbled, along with yields."

Currency Markets in Flux

The dollar’s plunge on Friday was dramatic—down 2% against the yen and 1.5% versus the euro. While it clawed back some losses on Monday, the damage was done. The euro dipped slightly to $1.1560, and sterling eased to $1.3263, but both currencies remain well above their pre-report levels.

The yen, often a safe haven in times of uncertainty, surged as Treasury yields collapsed. The two-year yield hit a three-month low of 3.659%, reflecting the market’s aggressive repricing of Fed cuts. "The bond market is screaming recession," noted one trader. "The Fed has no choice but to act."

Global Ripples: Switzerland in the Crosshairs

Beyond U.S. borders, Trump’s trade policies added another layer of instability. Switzerland was blindsided by new tariffs—among the highest in Trump’s global trade reset—threatening tens of thousands of jobs in the export-reliant economy. The Swiss franc held steady at 0.8041 per dollar, but industry groups warn of long-term damage.

Meanwhile, commodity-linked currencies like the Australian and New Zealand dollars gave back some of their Friday gains, though they remain buoyed by the prospect of Fed cuts weakening the greenback. The Aussie slipped to $0.6465, while the kiwi dipped to $0.5905.

What Comes Next?

The Fed now faces a perilous balancing act. With inflation still above target but the labor market faltering, policymakers must decide whether to prioritize growth or price stability. For markets, the question isn’t if but how much the Fed will ease. As one strategist put it: "September’s cut is a done deal. The real debate is whether this is the start of a full-blown easing cycle."

Investors will scrutinize every Fed speaker and economic report in the coming weeks for clues. But after Friday’s seismic shifts, one thing is clear: the era of Fed cuts is closer than ever.