Mixed US jobs data sparks choppy moves in the US dollar

As markets hotly debate the Fed’s next policy moves, updates on the U.S. labor market — which Fed members said they are watching closely — will likely cause increased volatility among major U.S. dollar pairs.

Thursday, a report from Challenger, Gray and Christmas reflected 72,821 planned job cuts in Septemberslightly lower than the 75,891 reductions planned in August.

The report noted that “it will take several months for lower interest rates to affect employer costs,” but that it will also increase consumer spending, which may lead to higher demand for workers in consumer-facing sectors.

This may explain why of the 403,891 job plans in September, 401,850 of them were from seasonal employers in the Retail and Transportation/Storage sectors.

Link to the September Challenger Report

Later, the The Labor Department’s initial weekly jobless claims were printed at 225K in the week ending Sept. 28, slightly higher than estimates of 222,000 and the upwardly revised 219,000 figure from the previous week.

The report added that the four-week moving average was revised up 250 from 224,750 to 225,000.

Link to the Labor Department’s initial weekly jobless claims report

Meanwhile, S&P Global’s Final Services PMI also showed a downward revision from 55.4 to 55.2 for the month.

The details showed that the Employment component fell “only marginally”, although it still marked the second consecutive monthly decline. Respondents reported declining staffing levels and understaffing as reasons for the weaker employment outlook.

Link to S&P Global’s September Final Services PMI

Last but not least, The ISM services PMI increased from 51.5 to 54.9 in September. Not only did it mark the seventh consecutive month of expansion, but it also posted the highest reading since February 2023.

However, the report’s Labor Employment Index contracted for the first time in three months, down 2.1 points from 50.2 to 48.1.

Link to ISM’s September Services PMI

US Dollar vs. Major Currencies: 5 min

USD chart overlay against major currencies by TradingView

Apart from the Swiss franc, the US dollar held on to modest gains against other major currencies, driven by concerns over the Middle East conflict and ahead of key US labor market data.

The Challenger report initially triggered some declines, but the greenback rebounded ahead of weekly jobless claims. However, the dollar slipped again until we saw the S&P Global Final Services PMI and the ISM PMI.

There was additional volatility around the ISM PMI release, likely because the headline PMI hit multi-month highs while the Employment Index showed a contraction. To add to the uncertainty, President Biden suggested that Israel could target Iran’s oil infrastructure, which would have rattled some risk-takers.

The dollar rode the wave of positive ISM PMI data and geopolitical concerns, but it looks like profit-taking may have been introduced ahead of Friday’s NFP report.