US Treasury Yields, Dollar Drop on Weak Jobs Data, Fed Rate Cut Bets

U.S. Treasury yields and the dollar experienced sharp declines following weaker-than-expected U.S. employment data for July, which showed an increase of only 73,000 jobs and significant downward revisions for previous months. This labor market slowdown led traders to ramp up bets on the Federal Reserve cutting interest rates twice by the end of the year, with a high probability of a cut as soon as September. Fed officials, including Governors Christopher Waller and Michelle Bowman, expressed concern that delaying rate cuts could harm the labor market, a view echoed by market participants amid President Trump's ongoing pressure on Fed Chair Jerome Powell to lower rates. The 10-year Treasury yield fell to a three-month low, and the dollar weakened against major currencies such as the yen and euro. Despite Powell's recent hawkish stance emphasizing steady rates, the market reaction to the disappointing payroll report has shifted expectations toward easing monetary policy soon. Additionally, President Trump increased tariffs on Switzerland and major trading partners, contributing to economic uncertainty reflected in the labor data and bond market activity.