Market snapshot: dollar slips as hiring data fuels Fed rate-cut bets
The New York foreign exchange market saw the dollar retreat against the yen and the euro as fresh hiring data underscored a cooling U.S. labor market. Traders reassessed the path of monetary policy, leaning toward additional Federal Reserve rate cuts this year as softer employment figures keep inflation in check and growth under pressure.
At the close, the dollar/Yen edged 0.6% lower to around 147.07 yen, after slipping from a test of the prior week’s levels earlier in the session. The move comes as investors weigh whether a softer job market will accelerate the pace of policy easing, even as the Fed assesses the trajectory of inflation and growth.
Key price moves and data highlights
The U.S. employment picture took another turn, with ADP Research Institute reporting September private payrolls pulling back by 32,000. That decline marked the largest drop since March 2023. August payrolls were also revised sharply, from an originally estimated gain of 54,000 to a revised loss of 3,000. The ADP print received heightened attention because the Labor Department’s September payrolls release faced a likely delay due to a partial government shutdown in Washington.
Against this backdrop, the dollar index slipped about 0.2% to 97.68 in late trade, briefly testing a one-week low. The euro rose modestly, trading around $1.1738, up roughly 0.1% on the session and marking a one-week high in broader terms. The broader market mood suggested that investors are recalibrating expectations for U.S. monetary policy in the face of softer hiring data and ongoing fiscal uncertainty.
Fed rate-cut bets gain traction
Market pricing, as reflected by LSEG data, implies the Fed could deliver about 0.50 percentage point of rate cuts before year-end. The probability of the central bank delivering a cut at its October meeting remained near certainty, with estimates putting the odds at roughly 99%. In other words, the data narrative is tilting toward a more accommodative stance as officials balance cooling employment with inflation dynamics.
Analysts noted that each fresh data release appears to strengthen the case for eventual easing, with some suggesting that the job market’s softening remains the dominant theme in the immediate term. The evolving labor market picture reinforces investors’ belief that the Fed’s easing path could extend beyond a single cut, particularly if inflation risks remain subdued and growth remains uneven.
Geopolitical and market backdrop
The market backdrop also includes the U.S. government shutdown risk, stemming from partisan budget disagreements. With several federal agencies operating under funding constraints, traders are watching for any impact on official data releases and the broader economic signal these metrics provide. The absence or delay of September payrolls from the Labor Department has amplified the focus on the ADP print as a gauge of labor market momentum.
Commentary from market participants highlighted caution. One trading desk head emphasized that a prolonged shutdown could weigh on dollar strength, noting that “the economy’s ability to show resilience in the job market remains a key question for the near term.” Meanwhile, another strategist pointed to the constructive reactions in the euro and Swiss franc as evidence that funds are seeking a balanced mix of risk and reward amid uncertain fiscal conditions.
What to watch next
Markets await the Federal Reserve’s next policy decision, slated for late October (October 28–29). With probability-heavy pricing favoring additional easing within the year, traders will scrutinize incoming data for signs that inflation has softened enough to justify a broader easing cycle. In the near term, the FX landscape could continue to favor currencies perceived as benefiting from lower U.S. interest rates and potential risk-on sentiment should economic indicators surprise to the upside elsewhere.
Bottom line
As hiring momentum cools, the U.S. dollar faces renewed pressure from rate-cut expectations. The dollar’s decline against the yen and the euro underscores a global shift in the policy outlook, with financial markets preparing for a potential framework of more accommodative monetary policy as the year progresses.
