The USD has been quite bullish since March, but last week and early this week we saw a strong retreat, which sent it more than 5 cents lower. Although on Wednesday the decline stopped and in the last two days the USD turned bullish again, making some decent gains.

Today though, forex market has quiet as we were heading to the US and Canadian employment reports, which were relead a while ago. The risk sentiment has been extremely sensitive to economic data, so today’s report was going to have some decent impact on the markets. A sizeable miss or an exceeding of expectations was expected to kick off volatility, which it did.

The position in the risk sentiment recently has been to shrug off the positive data and react strongly to weaker reports. Although, the 5% rally in stocks so far this week might have changed that equation, balancing it out. The FED odds prior to the unemployment figures were 85% for a 75 bps hike on November 2 and 15% of 50 bps after that.

US September Employment Report

• Prior was +315K
• Two month net revisions K
• Estimates ranged from +127K to +375K
• Unemployment rate 3.5% vs 3.7% expected
• Prior unemployment rate 3.7%
• Participation rate 62.3% vs 62.4% prior (was 63.4% pre-pandemic)
• U6 underemployment rate 6.7% vs 7.0% prior
• Average hourly earnings +0.3% m/m vs +0.3% expected (prior +0.3%)
• Average hourly earnings +5.0% y/y vs +5.1% expected (prior 5.2%)
• Average weekly hours 34.5 vs 34.5 expected
• Change in private payrolls 288K vs +265K expected
• Change in manufacturing payrolls +22K vs +19K expected
• Household survey +204K vs +440K prior

The kneejerk reaction is a higher US dollar with USD/JPY higher and Gold lower. The implied odds of 75 bps are now up to 88% from 85% earlier. This is a good report, although not too far from expectations, apart from the unemployment rate. Unemployment ticked down, even if it was mostly due to labor force participation falling. The BLS noted that “Hurricane Ian had no discernible effect on the employment and unemployment data for September. Household survey data collection was completed before the storm made landfall in Florida.”

Gold XAU Live Chart