US dollar just posted its fifth straight weekly loss, the longest since April 2023

The dollar just recorded its fifth straight week of losses, the worst losing streak since April 2023. This drop followed a weak U.S. labor market report that hit traders like a freight train.

The Bloomberg Dollar Spot Index slumped as much as 0.7% on Friday, locking in another brutal week for the currency. So far this year, the dollar has fallen more than 8% against a group of global currencies.

The moment the jobs data hit, traders flipped. They locked in bets that the Federal Reserve will cut rates this month, and not just a small trim. Some are even putting money on a half-point cut.

Traders price in Fed cuts as inflation looms

“After this report, markets will likely be priced dovishly for the Fed path,” said Jayati Bharadwaj, strategist at TD Securities. She added, “We maintain a bearish dollar structural view with an eye out for near-term bounce.”

This bearish movement is gaining speed. Traders now expect the Fed to return to full-on monetary easing. Friday’s weak payroll numbers only fueled that. On top of that, investors are watching fiscal risks and former President Donald Trump’s tariffs, both weighing down the dollar like dead weight.

“Today’s report was not great and just adds fuel to the fire of the idea that the Fed is slipping well behind the curve,” said Brad Bechtel, global head of FX at Jefferies. He added, “Market expectations for more rate cuts makes sense and next week’s inflation report is likely make or break on the dollar.”

That report lands on Thursday. Estimates from Bloomberg suggest inflation will heat up in August. It’s expected to rise after staying locked at 2.7% for both June and July. If that number spikes, rate-cut pressure could ease. But if inflation stays calm, or even just drops, the Fed might finally blink.

Traders aren’t waiting. Hedge funds and other speculators are already stacking bearish bets. As of the week ending August 26, net short positions on the dollar hit $5.6 billion, based on Commodity Futures Trading Commission data. These bets have stayed negative since April, and they’re growing.

On Friday, the entire group of major currencies rose against the greenback. The yen and Swiss franc both gained around 1%.

But Canada’s loonie trailed after jobs data showed the country lost positions for the second month in a row. That raises the chances the Bank of Canada will also cut rates soon, adding more pressure to the dollar across North America.

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