As markets hotly debate the Fed’s next policy moves, US labor market updates – which Fed members said they are closely following – are likely to increase volatility between major US dollar pairs.
Thursday report from Challenger, Gray and Christmas reversed 72,821 planned job cuts in SeptemberThis is slightly lower than the cuts scheduled for August, which amounted to 75,891.
“It will take a few months for lower interest rates to impact employers’ costs,” the report noted, but it will also increase consumer spending which could lead to increased demand for workers in consumer-facing sectors.
This may explain why out of the 403,891 plans hiring in September, 401,850 were seasonal employers in the retail and transportation/warehousing sectors.
Link to the September Challenger report
later, The Labor Department’s weekly initial unemployment claims were 225,000 In the week ending September 28, slightly above estimates of 222K and an upwardly revised figure of 219K from the previous week.
The report added that the four-week moving average was revised by 250 points from 224,750 to 225,000.
Link to the Department of Labor’s weekly initial unemployment claims report
Meanwhile, S&P Global’s final services PMI also showed a downward revision from 55.4 to 55.2. For this month.
Details revealed that the employment component fell “only marginally”, although it still marked its second consecutive monthly decline. Survey respondents reported that low employment levels and staff shortages were reasons for poor employment opportunities.
Link to S&P Global’s final services Purchasing Managers’ Index (PMI) for September
Last but not least, The ISM Services PMI jumped from 51.5 to 54.9 In September. Not only did it mark the seventh consecutive month of expansion, but it also recorded its highest reading since February 2023.
However, the report’s employment index contracted for the first time in three months, falling 2.1 points from 50.2 to 48.1.
Link to the ISM Services Purchasing Managers’ Index (PMI) for September
US dollar against major currencies: 5 minutes
Overlay of the US dollar against major currencies Chart by TradingView
Aside from the Swiss franc, the US dollar maintained modest gains against other major currencies, driven by concerns about conflict in the Middle East and ahead of key US labor market data.
The Challenger report initially sparked some declines, but the US dollar bounced back ahead of the weekly jobless claims release. However, the dollar fell again until we saw the final services PMI from S&P Global and the ISM PMI.
There was additional volatility around the ISM PMI release, likely because the headline PMI reached multi-month highs, while the employment index showed contraction. Adding to the uncertainty, President Biden suggested that Israel might target Iranian oil infrastructure, which could have alarmed some risk takers.
The dollar rode the wave of positive ISM data and geopolitical concerns, but it appears that profit-taking may have begun ahead of Friday’s non-farm payrolls (NFP) report.