The dollar slid against the euro on Friday (2 September) after the latest non-farm payrolls report left economists somewhat disappointed and all but ruled out a September rate hike by the Federal Reserve. The greenback fell 0.19% against the common currency to 0.8912 euro cents, but was broadly flat against the yen, exchanging hands at ¥103.25.

Official data showed the US economy added 151,000 jobs last month, slowing sharply from the previous two months and falling short of the consensus forecast for a 173,000 gain.

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"The data has failed to paint this picture and crushed the dollar bulls who were holding their hopes very high that a rate hike could be possible this month," said Naeem Aslam, chief market analyst at Think Markets UK.

"The flags were raised yesterday when we had the most ill ISM manufacturing data and if we combine this with today's wage weak wage growth, it all has failed investors' s hopes of cementing a rate hike."

The unemployment rate and labor force participation rate held steady at 4.9% and 62.8%, respectively. Wage gains were the biggest disappointment, as it slowed down to +2.4% from a revised higher +2.7% on a yearly basis, while the underemployment rate was unchanged at 9.7%.

"We expect no rate hike this month, but things will be different by December," said Ian Shepherdson
chief economist, at Pantheon Macroeconomics.

"Wage growth will have rebounded, and we expect payrolls to be rising more quickly too. But only three more employment reports will be released before the Fed meeting in December, so there's little scope for further downside surprises if the Fed is going to act this year."

Elsewhere, pound was on track to end the week on an upbeat note after a report indicated British businesses were growing more confident and a reading on the construction industry showed the sector was overcoming Brexit jitters.

Sterling was up 0.1% against the euro to €1.1864, only slightly lower than the four-week high it touched in the previous session, and against the dollar, it was up 0.46% at 1.3336.

The gains came after Markit's latest Purchasing Managers' Index (PMI) for the construction sector remained below the 50 threshold that signifies expansion for the third consecutive month, but rebounded from July's seven-year low of 45.9 to 49.2 last month.

The figure was comfortably ahead of the 46.5 reading analysts expected and signalled the slowest pace of decline since the downturn began in June.

However, the recovery was not as marked as it was in the manufacturing sector, where the PMI reached a 10-month high on Thursday.

"It is not surprising that construction has not matched manufacturing's surge yesterday, since a weaker pound has less impact on the sector, and by pushing up the price of imports may actually act as more of a drag," said Chris Beauchamp, chief market analyst at IG.

There was more positive news for the pound as the YouGov/Centre for Economic and Business Research (CEBR) business confidence index climbed to 109.7 from 105 in July. The poll, compiled from over 500 interviews with key decision makers at companies, revealed that 48% were optimistic over their prospects for the next 12 months in August, up from 46% in the previous month.

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