News & Analysis

After a tumultuous September, the topic that has dominated most discussions across all corners of financial markets in the first week of October was whether the Fed was going to pivot or not. Ahead of Friday’s payrolls data, this debate also played out in financial markets. In the blue corner for the doves were financial stability concerns, slowing goods inflation, and falling labour demand. While supporting the hawks in the red corner were hawkish Fed commentary, a still strong services sector, and strong preliminary employment data. The payrolls data ultimately sided with the hawks as the net employment increase of +263k showed employment growth remained at healthy levels, while at 62.3%, there were no visible signs just yet that the employees absent in the labour market were being either forced back in due to economic conditions or enticed by higher wage growth. With the unemployment rate falling to a record low of 3.5%, the emphasis very much remains on the Federal Reserve, with pressure potentially mounting next week from September’s CPI report.

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Authors: 
Simon Harvey, Head of FX Analysis
Jay Zhao-Murray, FX Market Analyst
María Marcos, FX Market Analyst

 

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