US Dollar Declines Amid Weak Jobs Data, Japan Political Uncertainty

The U.S. dollar is experiencing persistent weakness, influenced by several factors including diminishing interest rate advantages, ongoing inflationary pressures, and global economic rebalancing reducing reliance on the dollar. Recent soft U.S. jobs data, with only 22,000 jobs created in August and rising unemployment, has intensified market expectations for Federal Reserve rate cuts, pressuring the dollar and Treasury yields downward. Political uncertainties abroad, such as the resignation of Japan's Prime Minister Shigeru Ishiba and an expected confidence vote loss in France, have also affected currency markets, contributing to volatility in the yen and euro. Despite some short-term dollar sell-offs, the currency remains supported by geopolitical dynamics, though further easing by the Fed, possibly a 150bp cut by next summer, is anticipated, which could prolong dollar weakness. Market focus this week includes U.S. inflation data and payroll revisions, which may further influence Fed policy and dollar trajectory. Overall, the dollar's outlook remains bearish amid domestic economic softness and global fiscal and political shifts.