Well, here we are waiting for the long-awaited release of the September NFP(Non-Farm Payrolls), which came in just above the expected 263,000. This reading followed August’s increase of 315,000 and came in better than the market expectation.
This may indicate that the situation in the labor market, although it has improved, remains tense. And this could still affect the most important and liquid assets like the US Dollar, gold ($XAUUSD), as well as major stock indices like Dow Jones ($DOW30), and S&P 500 ($SPX500).
What NFP at 263K means for the markets?
The dollar was the first to react to the NFP publication.
For example, the $EUR/USD fell from 0.9790 to 0.9750 reaching the lowest level in a week following the release of the US official employment report that showed numbers slightly above expectations. The greenback strengthened after the numbers.
Prior to the report, the pair was moving in the range between 0.9785 and 0.9815. It is moving away from the lows, back into the range as the initial reaction of the dollar fades.
In contrast to the rising dollar, the major U.S. indices began to decline.
The $DOW30 declined substantially, indicating that the markets were not ready for just such an outcome.
The $SPX500 is also down significantly and is now trading at 3,680, moving steadily lower still.
Accordingly, the numbers triggered volatility across financial markets, ending with hours of limited price action.
In general, this reaction is perfectly logical. Dollar bears and stock bulls only need an NFP of under 100K to reach the “beginning of the end” of Fed tightening – slower rate hikes.
But that didn’t happen, and the data turned out to be softer.
What’s next?
For now, the reaction will remain until Monday – the dollar and gold may rise, and the indices may fall.
But the focus will soon shift to next week’s all-important Consumer Price Index (CPI) report. Seeing peak inflation in the rearview mirror is critical for reaching peak Fed hawkishness and a market turnaround. Yet after Powell’s “pain” comments in Jackson Hole, current robust job gains suggest that one weak inflation report is insufficient for a Fed pivot – nor a market one.
Summary
- US job growth has remained robust in September – 263K jobs gained.
- Stock advances will likely remain “bear market rallies,” and the dollar’s reign is set to continue.
- The Federal Reserve is likely to ramp up its hawkish rhetoric, raising the chances of fast hikes.
