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Expectations for an October rate hike fell close to zero after NFP - UBS

FXStreet (Córdoba) - US labor market data for September was disappointing. Non-farm payrolls rose less than expected with an additional 142,000 new jobs. This is 59,000 below the 201,000 expected by the market. Gains from the previous month were revised down by another 37,000. The unemployment rate managed to stay at 5.1%, but work-week hours fell and wages did not rise.

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“After the data release, expectations for an October rate hike fell close to zero. The probability of a December hike also looks more remote, according to the prices of Fed fund futures”.

“The USD fell as well, which is to be expected after such a disappointment. With the EURUSD close to 1.13 and USDJPY touching 119, the move was large enough and will not go by unnoticed”.

“But is this a reason to turn bearish on the USD? We think not, but we see it will take even longer for the USD rally to unfold. More patience is needed. Extremely strong November data is also needed to convince the Federal Reserve to move in December”.

“The Fed is still likely to be the first central bank to hike rates, so the USD is likely to appreciate against the EUR. We still expect the EURUSD to move lower within the 1.15–1.05 range soon, especially since the Eurozone is affected by the same international troubles as the US, and their relative proximity to the point at which they have to raise rates – the main thing investors should watch – remains unchanged”.

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