Soft NFP Knocks Out October Fed Hike, Dollar Retreats—But Euro Still Lags
September’s US employment report was almost the cleanest dovish combination markets could have received. Payrolls rose just 29K against a 90K consensus, unemployment edged up to 4.2%, wages undershot and prior months were revised lower again. Treasury yields fell, October Fed hike expectations collapsed into the low teens and the Dollar Index was knocked back below 102.
Dollar Index Eyes 103 as Silver Tests 60—NFP Could Resolve Both
Dollar Index is heading towards the 102.77–103.00 resistance zone while Silver stabilizes near 60 after falling from 71.16—the two markets are trading the same macro bet from opposite sides, and September's NFP report, including the wage component, could resolve both in the same session.
France Risk Premium Surges as OAT-Bund Spread Breaks 140bp, EUR/CHF Slides
The OAT-Bund spread widened past 140.6bp, its widest since the 2012 eurozone debt crisis, as French 10-year yields surged to 4.935% while German Bund yields fell to 3.529%—a divergence pointing to a France-specific sovereign risk premium that EUR/CHF is now starting to transmit into FX.
Bond Rout Extends Into Q4 as Dollar Rises and EUR/USD Breaks 1.13
Q4 opened as a continuation of Q3. Global sovereign bonds extended their selloff, the US 10-year Treasury yield rose to around 5.34%, the Dollar pushed higher after a sixth consecutive quarterly gain, and EUR/USD broke below 1.13. This came even though softer August PCE inflation had already reduced conviction in another Fed hike in October.
