Caution ahead of Friday’s U.S. NFP release may have limited overall volatility, but specific asset catalysts still generated significant movement in the major markets.
So, what headlines took center stage on Thursday?
Let’s break it down:
Headlines:
- BOJ member Asahi Noguchi supports adjusting monetary policies “at a slow pace” and suggests pausing to evaluate the impact of the first rate hike before considering further increases.
- Switzerland's inflation decreased by 0.3% month-over-month in September, driven by lower petrol, accommodation, and holiday costs, with annual inflation rising by 0.8%, the slowest since July 2021.
- HCOB Germany's final services PMI confirmed at 50.6 for September; “Prices charged rose more slowly than in August,” while employment fell at the fastest rate in over four years.
- HCOB Eurozone's final services PMI was revised upward from 50.5 to 51.4 in September; “Output charges increased only modestly,” and job creation was slightly faster than in August.
- S&P Global's U.K. final services PMI was revised down from 52.8 to 52.4 for September.
- BOE Governor Bailey stated that the central bank could be “more aggressive” in cutting interest rates if inflation continues to improve.
- Euro Area industrial producer prices rose by 0.6% month-over-month in August, compared to an expected 0.4% (July reading revised from 0.8% to 0.7%).
- U.S. Challenger job cuts decreased from 75,891 to 72,821 in September, noting that most hiring plans are from seasonal employers.
- U.S. weekly initial jobless claims for the week ending September 28 were 225,000 (expected 222,000; previous 219,000).
- U.S. S&P Global's final services PMI was revised down from 55.4 to 55.2 in September.
- U.S. President Biden mentioned discussions with Israel about potentially targeting Iran’s oil infrastructure.
- U.S. ISM services PMI rose from 51.5 to 54.9 in September, though the Employment Index contracted for the first time in three months.
- U.S. factory orders fell by 0.2% month-over-month in August (expected 0.1%) following a 4.9% increase in July.
Market Price Action:
Early in the day, a lack of significant data releases kept major assets within tight ranges. However, volatility increased as the European session began, with U.S. dollar alternatives such as gold, crude oil, bitcoin, and U.S. stock futures declining. Rising tensions in the Middle East and profit-taking ahead of Friday’s U.S. NFP report likely contributed to these movements.
During the U.S. session, the 10-year Treasury yield gained bullish momentum as jobs data stoked expectations for additional Fed rate cuts. Crude oil prices surged after President Biden indicated discussions about Israel potentially targeting Iran’s oil infrastructure.
Gold rallied on this news, hitting daily highs before closing at $2,655, while WTI crude rebounded from $70.60 to $73.80. The 10-year Treasury yield ended the day near 3.85%, bitcoin remained below $61,000, and U.S. stock indices closed slightly lower than their opening levels.
FX Market Behavior: U.S. Dollar vs. Majors:
The U.S. dollar started strong against the yen, Swiss franc, and the Australian and New Zealand dollars, likely due to weak data from those countries and traders pricing in Tuesday’s stronger-than-expected ADP report.
USD/JPY initially gained on dovish BOJ speculation but lost momentum after BOJ member Noguchi clarified that policy adjustments remain possible, though at a slower pace.
The British pound fell after BOE Governor Bailey hinted at the potential for “more aggressive” rate cuts during a newspaper interview. Additionally, a weaker-than-expected Swiss CPI report increased the chances of an SNB rate cut, putting further pressure on the franc.
The U.S. dollar maintained its gains against the AUD, NZD, and GBP until U.S. labor market data caused choppy price action. Ultimately, the dollar advanced towards its highs, bolstered by a stronger-than-expected ISM services PMI and concerns regarding Israel's potential actions against Iran’s oil infrastructure.
Upcoming Potential Catalysts on the Economic Calendar:
- Switzerland unemployment rate at 5:45 am GMT
- France industrial production at 6:45 am GMT
- BOE member Huw Pill's speech at 7:55 am GMT
- U.K. construction PMI at 8:30 am GMT
- U.S. NFP reports at 12:30 pm GMT
- FOMC member John Williams' speech at 1:00 pm GMT
- Canada IVEY PMI at 2:00 pm GMT
It’s NFP Friday! Price action may be muted ahead of the release, but we could see pockets of volatility following Switzerland’s unemployment rate and BOE Chief Economist Huw Pill’s speech in London.
In the U.S., labor market figures are expected to show weakness in September, potentially fueling aggressive Fed rate cut expectations. Be sure to check out our U.S. NFP Report Event Guide if you’re trading the release!
