On Thursday, the euro (EUR) bounced back against the US dollar (USD) after an earlier decline, as the dollar lost traction due to traders reacting to mixed labor market data for September in the US. Currently, the EUR/USD is trading near 1.1541, recovering from a low of around 1.1502 earlier in the day.
The September labor data presented a mixed outlook. Nonfarm payrolls (NFP) grew by 119,000, which was significantly above the expected 50,000. However, the previous month’s figures were adjusted downwards, showing a reduction of 4,000 instead of an increase of 22,000 as initially reported. Additionally, the unemployment rate climbed to 4.4%, slightly over the anticipated 4.3%. On a more positive note, the labor force participation rate improved to 62.4%, indicating a slight increase in employee engagement.
Wage growth seemed to slow down month over month, with average hourly earnings rising by 0.2%, compared to the forecast of 0.3%. Year-over-year, wages were up by 3.8%, just a touch over the expected 3.7%. Average weekly hours stayed stable at 34.2 hours.
The market’s reaction was somewhat subdued due to the mixed nature of the data—strong overall job growth, weak wage increases, a small uptick in unemployment, and a downward revision for August. This report takes on added significance now that the October jobs report has been delayed, making September one of the few labor indicators available before the Federal Reserve’s meeting in December. Currently, market predictions for a rate cut in December are at 39%, down from nearly 50% just a week prior, according to the CME FedWatch Tool.
Cleveland Fed President Beth Hammack has reiterated her hawkish views in recent comments, warning against interest rate cuts at this juncture. She suggested that such moves could distort market pricing and exacerbate inflation issues. Hammack also cautioned that premature rate cuts might encourage excessive financial risk-taking, which could undermine financial stability. She noted that so-called “risk management” cuts could inadvertently heighten vulnerabilities within financial markets.
