The U.S. dollar extended its retreat on Monday, pressured by growing expectations that the Federal Reserve will restart its easing cycle at next week’s policy meeting, following a disappointing U.S. jobs report.

At 04:15 ET (08:15 GMT), the Dollar Index — which tracks the greenback against six major peers — slipped 0.1% to 97.590, adding to a 0.5% drop on Friday.

Fed Rate Cut in Focus

Friday’s nonfarm payrolls report revealed a sharp slowdown in U.S. job creation and a rise in unemployment to 4.3%, the highest in nearly four years. The figures bolstered speculation that the Fed will cut rates on September 16-17.

Analysts at ING noted the softness could even open the door to an outsized 50 basis point reduction, though markets are currently pricing in only a 10% chance of such a move, according to CME FedWatch.

Traders are now eyeing this week’s August CPI data, where a 0.4% month-on-month print (above the 0.3% consensus) could temporarily support the dollar.

Euro Held Back by French Turmoil

The euro gained 0.1% to $1.1730, supported by German industrial production data showing a 1.3% rise in July. However, political instability in France limited upside.

Prime Minister François Bayrou is expected to lose a no-confidence vote over his budget plan later Monday, raising the risk of renewed fiscal uncertainty. France’s 30-year bond yield recently hit its highest level since 2009, reflecting investor unease over debt sustainability.

The British pound edged up 0.1% to $1.3520, adding to Friday’s gains.

Yen Slips After Ishiba Resignation

The Japanese yen weakened, with USD/JPY up 0.3% at 147.80, after Prime Minister Shigeru Ishiba resigned following election setbacks and party dissent. His exit has heightened political uncertainty, clouding Japan’s fiscal and monetary policy outlook.

Data showed Japan’s economy expanded faster than expected in Q2, aided by stronger consumption and inventories.

Elsewhere, the onshore yuan was steady at 7.1325 per dollar, while the Australian dollar rose 0.3% to $0.6580.