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The US elections are happening this week. While market volatility has already reared its head in the weeks leading up to the election results, the latest jobs data is doing precious little to assure market participants.
In October, only 12,000 jobs were added, marking the weakest monthly gain we’ve seen in four years. This starkly contrasts with the previous month’s robust addition of 254,000 jobs, leaving many wondering what has changed so dramatically.
Despite the unemployment rate holding steady at a historically low 4.1%, signs are emerging that the job market is beginning to cool down.
Several factors have contributed to this downturn, including the recent impact of hurricanes and a strike at Boeing, which has disrupted hiring in various sectors.
Job growth is now concentrated in health care and government roles, while industries like manufacturing, leisure, hospitality, retail, and transportation are feeling the pinch.
This situation serves as a reminder that economic downturns don’t affect all sectors equally—some weather the storm better than others.
Adding to the uncertainty, revisions to past job creation numbers have brought a dose of realism to the situation. The Bureau of Labor Statistics adjusted its figures for August and September downwards by 112,000 jobs.
This change suggests the labour market is not as robust as hoped, prompting traders to reassess their expectations. Meanwhile, data from the Job Openings and Labor Turnover Survey (JOLTS) indicates a cautious approach among employers, with an uptick in layoffs suggesting that fewer people are willing to leave their jobs in search of better opportunities.
We are witnessing a shift towards an “employer’s market,” where job security is more elusive, and opportunities are fewer. As market participants process this information, all eyes turn to the Federal Reserve’s next moves.
Before the jobs report, there was a 98.4% chance of a 25 basis point rate cut at the upcoming meeting on November 7th. Now, this probability has edged slightly higher to 98.9%. Looking further ahead, the likelihood of another cut in December has increased from 74.6% to 82.7%, signalling a growing expectation for continued support for the labour market.
Interestingly, even with the disappointing jobs data, stock markets reacted positively, opening higher.
This might seem counterintuitive, but the expectation is that the Federal Reserve will respond to the weak jobs report with lower interest rates. Lower rates typically make borrowing cheaper, which can encourage both investment and consumer spending, ultimately driving stock prices up.
The US Dollar Index (USDX) has shown a rise from the 103.40 area immediately following the jobs report.
Look for bearish price action at the 104.80 and 105.30 levels.
Meanwhile, the EURUSD pair has dipped but hasn’t reached the anticipated sell zone of 1.0940. Traders are now focused on the 1.0800 level for potential action.
GBPUSD has seen a rise from the 1.2840 area, although the momentum hasn’t yet attracted strong buying interest. If it trades lower, watch for bullish action around 1.2790.
Across the pond, USDJPY is trading upward, having missed the chance to test the 151.00 area, but should it reverse, bullish movement is expected at that level.
USOil has dipped from the monitored area of 71.70, with the potential to break lower towards 66.938 and possibly even 65.508.
Gold, after initially trading up from 2730, consolidated before retracing. Keep an eye on 2690 for support.
If gold can maintain its bullish momentum, it might even test those all-time highs again.
Bitcoin’s price has been quite volatile, increasing from 68,850 to around 67,850. If it doesn’t show a strong rejection at this level, we could see it dip to 65,244 before attempting any upward moves.
With the US presidential election looming, traders will likely remain vigilant about how political developments may influence immediate trading decisions.
The upcoming Fed meeting is bound to provide further clarity, but for now, the focus remains on understanding and responding to the evolving economic picture.
Tuesday takes our attention to Down Under; Australia’s cash rate is forecasted to remain at 4.35%, unchanged from previous levels. Early-week trading dynamics could see price movements rise, potentially affecting the US Dollar amid presidential election developments.
On Wednesday, New Zealand’s unemployment rate is expected to rise to 5.0%, up from 4.6%. This data will be particularly relevant in the context of the recent elections and may impact the NZD sentiment.
The UK’s Official Bank Rate is forecasted to announce a decrease from 5.00% to 4.75% on Thursday. Market reactions will depend on how this adjustment aligns with trader expectations during the announcement.
Capping off the week on Friday, the Federal Fund Rate in the U.S. is expected to drop to 4.75% from 5.00%. If the USD has reached recent highs, traders may see price corrections due to profit-taking.
The Canadian unemployment rate is anticipated to increase slightly to 6.60%, compared to the previous 6.50%. How these figures align with expectations will shape market movements throughout the day.
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