US non-farm payrolls report takes center stage in global financial markets today. Expectations are for an increase of 106k jobs in October, which would mark the lowest monthly gain in nearly four years. Unemployment rate is projected to remain unchanged at 4.1%, and average hourly earnings are anticipated to rise by 0.3% mom. However, given one-off factors like recent strikes and storms impacting the numbers, markets may largely discount the report’s implications for the broader employment trend.
Recent economic indicators offer a mixed picture. ADP Employment report showed a robust gain of 233k net new jobs in October, up from the previous month’s upwardly revised 159k. Conversely, the four-week moving average of initial unemployment claims increased to 236k from 224k, suggesting some softening in the labor market. The employment components of the ISM manufacturing and services reports are yet to be released.
Regarding the Fed’s policy outlook, two additional 25 basis point rate cuts are expected by year-end, one this month and another in December. Under the Fed’s dual mandate, resurgence in inflation—not strong employment data—is more likely to prompt a slowdown or pause in the rate-cutting cycle. Even a significant downside surprise in today’s NFP report is unlikely to bring a 50bps cut back into consideration at the next meeting. However, it would factor into Fed’s deliberations in December, alongside upcoming inflation and employment data.
Technically, Dollar Index could have formed a short term top at 104.63 already. Nevertheless, consolidations should be relatively brief as long as 23.6% retracement of 100.15 to 104.63 at 103.57 holds. Break of 104.63 will resume the rally from 100.15 towards 106.13 resistance next.
However, firm break of 103.57 will open up deeper correction to 38.2% retracement at 102.91, which is close to 55 D EMA (now at 102.86).
