US Jobs Report Competes With The Unsettled Equity Market To Drive The Greenback

The US dollar is broadly stronger.  Against many G10 pairs, it is at its best level since Tuesday’s midterm elections.  Ahead of the US jobs report, the euro and sterling are holding on to small gains for the week. The Antipodean currencies and the Norwegian krona are off 1.5%-2.25% this week.

The sharp equity losses in recent days, reflecting, in part, questions over the AI meme, and the sharp drop in oil prices this week (December WTI is off 12.6%, even after yesterday’s 2.7% recovery and firmer prices today) are important drivers this week.  Ten-year yields in the G10 are off 2-14 bp this week, with nearly 14 bp decline in JGBs coming today. The 10-year Gilt yield eased the least—a little more than two basis points. A poor US jobs report can still roil the markets.  Ahead of the report, the Fed funds futures are discounting a little less than a 70% chance of a December Fed hike, which is the lower end of where it has been since early September.  

Prices 

G10

• The euro traded within Wednesday’s range yesterday. It set the session low slightly ahead of $1.1200 before the 3.1 bln euro options expired.  As falling US equities dragged down US rates the euro recovered to almost $1.1240.  It has been sold to a four-day low in Europe today below $1.1170. Nearby support is seen in the $1.1150-55 area. Options for 960 mln euros at $1.1150 expire today. It has not been much above $1.1190 in Europe. 

• The dollar recorded the session high against the yen yesterday in North America, near JPY158.50 before equity market opened. It took a little more than an hour, but the greenback was driven to new session lows (~JPY157.65) as the sharp drop in equities pressured US rates lower. It was sold to almost JPY157.25 before it rebounded to JPY158.40 in Europe. Some buying may be related to today’s expiry of $3.6 bln of options struck at JPY158. 

• Sterling’s session high yesterday was recorded in Asia Pacific turnover near $1.3500, a few hundredths of a cent below Wednesday’s high.  Even after the BOE delivered the expected quarter-point hike, sterling was unable to rise above about $1.3485. At the end of H1 27, the swaps market sees the base rate at 4.57% (currently 4.0%, up from about 4.52% at Wednesday’s close and 4.50% at the end of last week).  It returned toward the week’s low near $1.3380 today. Nearby support is seen in the $1.3350-65 area. 

• The Canadian dollar traded quietly yesterday.  The greenback was confined to Wednesday’s range and traversed between around CAD1.3945 and almost CAD1.4025. The recent consolidation is a base. and the US dollar reached a little above CAD1.4080 today its best level in two-and-a-half weeks. Options for around $625 mln at CAD1.4050 expire today. The next technical target may be around CAD1.4160.  

• The Australian dollar was the weakest G10 currency yesterday.  It lost about 0.75% and posted an outside down day by trading on both sides of Wednesday’s range and settling below its low. It has continued to fall today. It has approached $0.6860, its lowest level since early April. Some selling may be linked to the expiry of options for almost A$800 mln at $0.6900 today. The Bollinger Band is set at two standard deviations below the 20-day moving average. With today’s sharp losses, the Aussie has approached three standard deviations (~$0.6855).  

EM 

• Catching most off-guard, Mexico’s central bank cuts its overnight target rate by 25 bp to 6.25% and indicated it would remain there for an extended period of time. It was a 3-2 vote and characterized as a “one-off”. The Mexican peso extended the session’s losses. The dollar spoked to the session high, slightly above MXN18.8450. That the greenback did not take out Wednesday’s high (~MXN18.87) may have little technical significance. Still, it is consolidating with a softer bias today. It is in range through the European morning between about MXN18.6765 and MXN18.8145. Yesterday’s price action reinforced dollar support near MXN18.50 that has been forged over the past two weeks.  

• The dollar was sold to a marginal new low for the day against the offshore Chinese yuan in the North American morning, near CNH6.6635, slightly below Wednesday’s low. Our working hypothesis is that, following the PBOC signals, a consolidative phase has begun, which may keep the dollar between CNH6.65 and CNH6.70. It is trading between CNH6.6615 and CNH6.6690 today. The PBOC set the dollar’s reference rate higher for the fourth time this week (CNH6.7168 vs. CNH6.7156. On weekly basis, it was the first time the dollar’s reference rate rose since early August.  The fix was at CNH6.7138 a week ago. 

• The drop in oil prices coupled with foreign demand for Indian stocks and has helped lift Indian rupee. It rose for the sixth consecutive session today. It rose by 1.1% this week, and it is the third weekly gain in the past four weeks. The greenback fell below INR94.00 for the first time since April. It settled below the 200-day moving average (~INR94.24) for the first time since July 2025.  

Other Markets

• The sharp drop in US equities yesterday cast a pall over today’s activity. The Nasdaq Composite was driven below its 200-day moving average for the first time since April. The S&P 500 fell below 7500 for the first time since the end of July. It 200-day moving average is near 7325.  Of the large bourses in the Asia Pacific region, only India escaped the carnage. Its major indices rose by 2%. However, Japan, Taiwan, and South Korean markets were tagged with 4.5%-6.0% losses. China’s CSI 300 was off almost 1.5%. Europe’s Stoxx 600 is off around 1.75%, which leaves it down by about 0.5% this week. Nasdaq 100 futures are 1.1% better and the S&P futures are around0.2% higher. 

• The sharp equity losses offset the jump in oil prices to send US yields lower. The 10-year US Treasury yield, which saw 5.36% a month ago, approached 4.81% yesterday. The 55 bp pullback compares with about a 37 bp decline in the anticipated Fed funds effective rate at the end of next year. While the German 10-year bund yield declined three basis points yesterday, peripheral yields edged higher. Today, benchmark 10-year yields are lower across the board. The 10-year yield tumbled nearly 14 bp today (to 2.62%).  European rates are mostly firmer, with UK Gilts and French Oats leading with 2.5-3.5 bp increases.  The 10-year US Treasury yield is near 4.85%. 

• Gold’s surge extended to almost $4147 yesterday, its best level since October 20, and the first close above the 20-day moving average (~$4066 today) since September 3. It is consolidating today with a heavier bias. It found support near $4036 today and is back near the 20-day moving average. Silver rose to almost $53.50 yesterday, a new five-day high. Resistance is seen around $55. It is trading between about $51.20 and $52.20 today. 

• December WTI made a marginal new low near $86.65 yesterday before it rebounded above $90 amid reports that a couple of ships that hit mines were on fire in the Strait of Hormuz.  The outcome of the US midterm election may have spurred exaggerated hopes of a near-term end to the war.  The contract rose to almost $92.55 today before falling in the European morning to nearly $89.  It is now near $90.75, which puts it down about 12.8% this week, snapping a five-week surge.  

Data

• The focus is squarely on the US employment report. The median forecast in Bloomberg’s survey is for a 65k increase after 29k in September.  The three-month moving average is 51k. The year-over-year pace of hourly earnings may dip below 3% for the first time since May 2021. The unemployment rate is expected to remain steady at 4.2%. The University of Michigan’s preliminary November reading may have little impact if inflation expectations hold steady (4.7% for the one-year and 3.5% for 5–10-year outlook). Depressed consumer confidence has not curtailed consumption.  Part of the reason is increased household borrowing and the drawdown in savings.  September consumer credit will be reported late in the session.  It has risen by an average of $12.25 bln a month this year through August.  It rose by an average of a little less than $8.4 bln in the first eight months of 2025. 

• Canada reports its October employment report, too. The median forecast in Bloomberg’s survey is for a 15k increase after a 68.3k decline in September, which was roughly evenly divided between full- and part-time positions. The unemployment rate is expected to hold steady at 6.5%, though economists are projecting a small increase in the participation rate. The swaps market sees the outlook for next month’s Bank of Canada meeting is nearly a 50/50 proposition. 

• The eurozone reported a larger than expected 0.7% decline in September retail sales.  They rose by a revised 0.4% in August (initially 0.1%).  The year-over-year pace slowed to 0.4% from a revised 1.3% in August (initially 0.8%). Last September, the year-over-year increase was 1.3%. 

• German industrial output rose by 0.7% in September. The median forecast in Bloomberg’s survey was for a 0.1% decline. The good news was dulled by the revision in the August series to 1.0% from 2.0%. 

• Japan reported September labor earnings today. Cash earnings rose 4.6% year-over-year (3.9% in August). When adjusted for inflation, real cash earnings accelerated to 2.2% from 1.6%. Using the same base for scheduled full-time pay saw a 3.1% rise (2.9% in August).  Cash earnings with the same sample base rose 4.4% after a 2.8% gain in August.  However, more important for economic rigor is if the wage increases lead to higher consumption and so far, that does not look to be the case.  Next week, Japan will report September household spending.  It contracted by 3.1% year-over-year in August. It has not been positive this year.