The U.S. Dollar picked up major steam across the board with the Bloomberg Dollar Spot Index rising half a percent while Japanese Yen is already down more than 1.0%.
Overview
This increase was driven by a stronger-than-expected jobs report, which dented expectations of another significant interest-rate cut by the Federal Reserve next month. The two-year Treasury yield briefly jumped as much as 17 basis points to 3.87%, reflecting the market’s reaction to the robust labor data.
Nonfarm payrolls increased by 254,000 in September, following an upwardly revised 72,000 advance over the prior two months, while the Unemployment rate fell to 4.1%. This positive labor market data has led to a reassessment of the Fed’s monetary policy trajectory, with traders now expecting a quarter-point cut in November instead of a larger reduction.
Key events to close out the eventful week include speeches by Fed officials which will provide further insights into the health of the US economy. Investors will also be watching for any geopolitical developments, particularly in the Middle East, which could worsen over the weekend. Overall, the strong labor data has provided a boost to the Buck after peers hit multi-month highs against it, but the market remains cautious as it awaits further signals from the Fed.
What to Watch This Week…
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EUR ⇓
The Euro experienced big downward movements as European Central Bank Governing Council member Mario Centeno announced that inflation in the Euro-area is now very close to the ECB’s 2.0% target. Speaking at a conference in Spain, Centeno highlighted that consumer-price growth in the 20-member region slowed to 1.8% in September, though it is expected to tick up again in the coming months. This development has increased the likelihood of another ECB interest-rate cut at the upcoming policy meeting on October 17. Centeno also noted that economic growth in Europe is facing significant challenges, and the labor market is starting to show signs of cooling. These factors will be central to the ECB’s decision-making process in the near-term thus the steadfast decline.
MXN ⇑
The Mexican Peso surged by more than 1.0% against the Dollar following stronger-than-expected U.S. payrolls data. This labor market report surely on the upside eased concerns about a potential U.S. recession, which bodes well for Mexico’s economy given its close ties to the U.S. Robust U.S. job growth has prompted a reevaluation of the Federal Reserve’s policy, with a more careful outlook on rate cuts. We shall see how the upcoming weeks lead to more comprehensive plans from President Sheinbaum as it relates to the economy rather than political agendas.
