The US dollar (USD) rose above its 200-day moving average as Federal Reserve funds futures reduced interest rate cut bets. Blank US employment data and tight October FOMC minutes led markets to discount the odds of a 25 basis point rate cut in December by more than 15 points to 27%. In parallel, Nvidia’s massive revenues are boosting the stock and adding more fuel to the AI-led exuberance, BBH FX analysts report.
FOMC minutes highlight the high threshold for the December cut
“Yesterday, the US Bureau of Labor Statistics (BLS) confirmed the cancellation of the October Nonfarm Payrolls (NFP) report and postponed the release of the November NFP to December 16, following the FOMC policy decision on December 10. This means that the September NFP data (1:30 p.m. in London, 8:30 a.m. in New York) and the October JOLTS release on December 9 carry additional weight — they are the only major jobs check the Fed is conducting ahead of time. “The show.”
“Nonfarm Payrolls are expected to come in at 51K versus 22K in August, consistent with the break-even pace of job gains (between 30K and 50K) required to hold the unemployment rate steady. Unemployment and participation rates are expected to remain unchanged at 4.3% and 62.3%, respectively. For reference, ADP private sector employment fell by -29K in September, while Nonfarm Employment (private and public) rose by 33K. The rate indicates Employment Labor Demand Weak and Points to Downside Risk to Read Today’s Non-Farm Payrolls Report Weaker-than-expected September job gains will lead to a rapid decline in the US dollar and will weigh on the short end of the Treasury yield curve. However, strong September job gains will give the US dollar’s rise a stronger fundamental anchor.
“Minutes from the October 28-29 FOMC meeting indicate that the level of December interest rate cuts is high. “Many participants estimated that further reduction in the target range for the federal funds rate may be appropriate in December…[But] Many participants suggested that it would likely be appropriate to keep the target range unchanged for the rest of the year. Many is a number greater than many.”
