Dollar Jumps as Robust NFP Gives Greenlight to Aggressive Fed

Dollar rises broadly after US published another set of robust non-farm payroll job data. As Fed got a nod from the report for continuing its aggressive tightening, US stock futures are trading knocked down while treasury yields jump. Canadian Dollar is also lifted slightly by solid employment data too. In immediate actions, Euro and Swiss Franc seem to suggest most, but Aussie could quickly catch up if risk-off sentiment intensifies. Meanwhile, watch out for intervention by Japan if Yen selling tries to take off.

In Europe, at the time of writing, FTSE is flat. DAX is down -0.52%. CAC is down -0.33%. Germany 10-year yield is up 0.117 at 2.203. Earlier in Asia, Nikkei dropped -0.71%. Hong Kong HSI dropped -1.51%. Singapore Strait Times dropped -0.18%. Japan 10-year JGB yield rose 0.007 to 0.254.

US NFP grew 263k in Sep, unemployment rate dropped to 3.5%

US non-farm payroll employment grew 263k in September, just slightly below expectation of 265k. Monthly job growth has averaged 420k in 2022, comparing with 562k in 2021.

Unemployment rate rose dropped from 3.7% to 3.5%, below expectation of 3.7%. Labor force participation rate dropped from 62.4% to 62.3%.

Average hourly earnings rose 0.3% mom, matched expectations.

Canada employment rose 21k in September, slightly below expectation of 22.5k. Unemployment rate dropped from 5.4% to 5.2%, below expectation of 5.4%.

BoE Ramsden: The central question is how forceful we need to be

BoE Deputy Governor Dave Ramsden said in a speech that before the November MPC meeting, policymakers will be seeking answers to “a range of questions” to assess how quickly inflation will return to target.

For him, the questions include: “is there any evidence that the tight labour market is easing; what is the revised outlook for demand in view of the Government’s fiscal announcements; are domestically generated inflation pressures consistent with returning inflation to the 2 per cent target; and what do financial market developments tell us.”

Meanwhile, the “central question” for all MPC members is “how forceful do we need to be, to ensure inflation does return sustainably to the 2% target”.

ECB survey shows inflation expectations might have peaked

According to ECB’s Consumer Expectations Survey (CES) in August, inflation expectations were largely unchanged comparing with July. Nevertheless, mean inflation expectations for the 12 month ahead dropped slightly, and could have peaked. Growth expectations also improved.

On inflation:

• Mean expectations for 12 months ahead dropped from 7.1% to 6.9.
• Median expectations for 12 months ahead was unchanged at 5.0%.
• Mean expectations for 3 years ahead was unchanged at 4.7%.
• Median expectations for 3 years ahead was unchanged at 3.0%.

On growth:

• Mean growth expectations for next 12 months improved from -1.9% to -1.7%.
• Median growth expectations for next 12 months improved from -0.1% to 0.0%.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 0.9745; (P) 0.9835; (R1) 0.9883; More…

Immediate focus is now on 0.9734 minor support in EUR/USD. Firm break there will argue that larger down trend is ready to resume through 0.9534. Next target is 100% projection of 1.0368 to 0.9534 from 0.9998 at 0.9163. For now, risk will stay on the downside as long as 0.9998 resistance holds, in case of recovery.

In the bigger picture, down trend from 1.6039 (2008 high) is still in progress. Next target is 100% projection of 1.3993 to 1.0339 from 1.2348 at 0.8694. In any case, break of 1.0197 resistance is needed to be the first sign of medium term bottoming. Otherwise, outlook will stay bearish even with strong rebound.

Economic Indicators Update