This week sees the first Friday of a new month, which means the release of the top tier US monthly employment report. This marquee risk event takes on even greater importance as the Fed has pivoted to placing greater weight on the full employment side of its dual mandate. That is due to the series of softer core inflation prints. How the NFP data turns out will influence markets which are once more torn between a 25bps and a 50bps rate cut at the Fed’s next meeting in November. The ISM reports are not expected to move the dial earlier in the week, sticking at levels consistent with a GDP slowdown.
We note that this is one of two payrolls reports before that next decision. But the dollar is precariously poised, sitting on a major support zone. That houses the long-term low from last December and also the 200-week simple moving average. Stocks have also enjoyed a strong recent rally, on the back of more policy easing expected soon. That bullish momentum has pushed the benchmark S&P 500 and the Dow Jones to record highs over the last week.
Markets will also focus on the latest inflation data out of the eurozone. German and French figures will be watched on Monday ahead of the region’s release a day later. President Lagarde already signalled a big drop in the headline at her latest ECB press conference. As always, the core number will be key, with recent poor PMI data potentially seeing it fall lower, though services inflation has been stubborn for some time. EUR/USD printed a weekly doji candle just below cycle highs around 1.12, denoting some indecision.