The U.S. Dollar is up this morning, rallying to recover some of the losses it took on yesterday.
Overview
The much-awaited Employment Situation shocked us all, with outstanding numbers for Non-Farm Payrolls coming in at 336K when only 170K were expected in September. Prior figures were also upwardly revised. In Manufacturing, there were an added 17K jobs, three times the estimated 5K. In terms of the Unemployment Rate and Average Hourly Earnings, things remained quite steady, with wages failing to increase by the forecasted 0.3% pace and coming in at 0.2%.
With labor remaining a pillar of strength, chances of an interest-rate hike at the November 1st meeting went up to 32.0%, but not a tremendous change that indicates the dollar will continue aggressively appreciating. Surprisingly, chances of a cut to interest rates by March are up slightly from 16.0% to 20.0%. All that said, I believe it is important to note just how off the numbers are, which follows a pattern of economists not foreseeing accurately and only adds to volatility going forward.
While the Buck strengthened slightly, it seems a lot of the damage has been done from risk-aversion after multi-year record yields on bonds caused havoc and added to the anxiety that global markets have over high-interest rates staying high for longer than they wish. FX intervention may not be coming, and cuts to interest rates may not be under consideration for quite a while, thus, markets have been in sell-off mode. After some encouraging Purchasing Managers Index out of the Eurozone and the U.K., we will see if the buck can stay afloat or give up some of its wild gains.
EUR ⇓
The Euro is down today but not falling apart entirely following some major labor gauges in the U.S., showing the sector is not cooling down. This week’s PMI helped the shared currency merit holding on to some of its value, with the belief that expansionary figures can materialize for Q4. Headlines have been negative as France, once more, felt embarrassed on the diplomatic stage by being snubbed by Azerbaijan as European leaders look to prevent a crisis from developing from a territorial conflict with neighboring Armenia. Nevertheless, Europeans are looking to have more influence and build it through military growth. It may take some time, but officials are set on developing a stronger defense and reach post-Ukraine.
MXN ⇓
The Mexican Peso fell to its weakest point since the end of March, primarily down as the dollar has dominated with expectations of high rates for longer. Idiosyncratically speaking, the rapid loss in value is also due to news that Tesla is considering pulling out of a manor factory hub project in Monterrey. While this pours cold water on foreign direct investment, there is also worry about new increases to airfare and other transport taxes by the government. Business-wise, it is sobering news that has exacerbated the dip.
