Friday’s Nonfarm Payrolls number for September continues to drive portfolio rebalances today. The surprise 254k payroll increase far exceeded the 150k estimate. Add to that the upward adjustment for August payrolls (142k to 159k) and the Unemployment Rate decline to 4.1% from the 4.2% previous, and overnight the labor market looks as healthy as it’s been since mid-2023.
Cooling labor conditions had recently become the primary focus driving the Fed’s rate policy, (replacing inflation which is on a downward trajectory), and underpinning expectations of nearly 75 bps of cuts before year-end. But with resurgent labor strength markets are now pricing in only 47bps of cuts by the FOMC’s December meeting.
U.S. Treasury yields surged in the wake of the jobs number, lifting the benchmark 10-year yield to 4.015%, its highest since an intraday spike to 4.02% on August 8th.
Higher yields drive demand for U.S. dollars, evident in the dollar index which is +0.68% since Thursday. The dollar gained vs. all G10 currencies with the biggest gains vs. APAC: +1.13% vs. NZD, +0.83% vs. AUD, and +0.74% vs. JPY.
The dollar has gained 0.83% vs. the Canadian dollar this month and is +1.37% since the September low at 1.3418. Less risk of an economic slowdown in the U.S. is supporting the dollar’s uptrend.
This week’s U.S. economic calendar features several scheduled appearances by FOMC members and the latest CPI release on Thursday and PPI on Friday.
