United States Dollar Index retreats after the US economy adds just 57K jobs in June

• US Dollar Index slides to a two-week low after disappointing US Nonfarm Payrolls data.
• Markets lower expectations for a September Fed rate hike after the NFP miss.
• Fed's Daly says inflation risks remain while policy stays slightly restrictive.

The US Dollar Index (DXY) trades under pressure on Thursday as weaker-than-expected US Nonfarm Payrolls (NFP) data dent expectations of a near-term Federal Reserve (Fed) rate hike.

The index, which tracks the Greenback's value against a basket of six major currencies, trades around 100.88 at the time of writing after hitting a two-week low of 100.56 earlier in the American session.

The Greenback was also weighed down by a sharp rebound in the Japanese Yen (JPY), with traders speculating that Japanese authorities may have intervened in the foreign exchange market after USD/JPY hit a 40-year high earlier this week. Japan's Finance Ministry declined to comment on the Yen's sudden surge.

Data released by the US Bureau of Labor Statistics (BLS) showed the US economy added just 57K jobs in June, well below market expectations of 110K. Meanwhile, May's payrolls were revised down to 129K from the previously reported 172K.

Not all of the Employment report was weak. The Unemployment Rate unexpectedly eased to 4.2% from 4.3%, while Average Hourly Earnings rose 0.3% MoM and 3.5% YoY in June, matching market expectations.

Traders responded by trimming September Fed rate hike bets, with the probability of a rate increase falling to 53% from 63% before the data release, according to the CME FedWatch Tool.

Still, the US Dollar may not see much further downside as markets continue to expect the Fed could raise interest rates later this year to bring inflation back to its 2% target.

Meanwhile, uncertainty over a final US-Iran peace deal continues to support demand for the safe-haven US Dollar. Indirect talks between the two sides concluded in Doha, with Qatari mediators reporting "positive progress," although no significant breakthrough was announced.

However, lower Oil prices in recent weeks have helped ease inflation concerns, reducing some of the pressure on the Fed to tighten monetary policy aggressively.

San Francisco Fed President Mary Daly said on Thursday, "There is a scenario where the Fed has to fight inflation; there's also a scenario where growth doesn't continue." She also said, "Fed policy is still in a slightly restrictive position."