US Dollar weakens as softer jobs data and oil decline cool Fed rate hike bets

THE US dollar index traded below the 101 level on Monday, extending its weekly losses as softer-than-expected labour market data and declining crude oil prices led investors to reduce expectations of additional interest rate hikes by the Federal Reserve.

Data released last week showed that US nonfarm payrolls increased by just 57,000 in June, significantly below forecasts of 110,000 and marking the weakest monthly gain in four months. The disappointing reading prompted markets to reassess the likelihood of a near-term rate hike, including in September.

The slowdown in hiring, combined with easing energy prices, has contributed to a softer inflation outlook, reducing pressure on the Federal Reserve to maintain a more aggressive tightening stance.

Oil prices also edged lower, adding further downward pressure on inflation expectations. Brent crude traded near US$68 per barrel on Monday, its lowest level since late February, amid concerns over a potential supply glut.

The decline has been driven by recovering energy flows through the Strait of Hormuz and expectations of higher output from OPEC+ producers. The group recently approved another modest increase in collective production quotas for the coming month.

Seven member countries, led by Saudi Arabia and Russia, agreed to raise output by 188,000 barrels per day, signalling confidence that supply conditions are stabilising following earlier disruptions in the region.

Major Gulf producers have also increased shipments, with Saudi Arabia’s exports rising close to pre-conflict levels, while the United Arab Emirates has similarly restored output after exiting OPEC during the period of conflict.

Meanwhile, tanker traffic through the Strait of Hormuz showed signs of normalisation on Sunday, following brief disruptions that saw several vessels making unexplained detours and U-turns along the critical shipping route.

Investors are now focusing on the upcoming release of the Federal Reserve’s June policy meeting minutes for further guidance on the central bank’s interest rate outlook. - July 6, 2026