The US Dollar edged down on Monday as a weak US jobs report bolstered odds the Federal Reserve may reduce rates this year.

Data published on Friday revealed US jobs growth decelerated more than forecast in April, and the rise in annual wages fell under the 4.0% mark for the first time in almost three years as indications of a cooling labour market increased optimism the Fed may engineer a “soft landing” for the economy.

As it stands, markets are now pricing in around 50 basis points of cuts in 2024, with a November rate cut fully priced in, Reuters reports.

“It's definitely what the Fed wants to see more of and the first report in quite a while that has surprised to the downside,” stated Dane Cekov, senior FX strategist at Nordea.

The Federal Reserve kept interest rates unchanged at the end of its two-day monetary policy meeting last week, as anticipated. However, it indicated a continued inclination towards eventual rate cuts, albeit possibly delayed compared to initial expectations.

“The weaker Dollar trend started with the Fed and Powell when he essentially shut the door on further rate hikes,” Cekov added.

The Dollar index, measuring the greenback against six rivals, was at 105.10 at the time of writing, after falling to over a three-week low on Friday of 104.52.  

The index is up almost 4% so far this year, but last week declined nearly 1%.

Elsewhere, Sterling rose on Monday ahead of the Bank of England’s policy announcement this week.

The Pound was up almost 0.3% against the Dollar at the time of writing at $1.2580, after last week hitting its highest since 10 April of $1.2634.

Sterling also edged up 0.2% against the Euro on Monday at 85.605 pence.

The Bank of England is widely anticipated to maintain its key interest rate at 5.25% when it announces its policy on Thursday, a level it has held since raising it in August last year.