September NFP Amid US Shutdown

The most relevant data point for predicting the Fed's October rate decision is likely to be delayed by the government shutdown, with little certainty about when the data could be released.

The Key Data Points

• Markets are expecting September NFP to show 50K jobs added, up from 22K a month earlier. The unemployment rate is projected to stay unchanged at 4.3%.
• The government shutdown affects the BLS, and it's unclear how or when the public will receive the data.
• Based on the continued deterioration of the labour market, markets are pricing in a near certainty of a rate cut at the next FOMC meeting.

Shutting Down the Reports

The BLS, which compiles key data points for the US economy, such as non-farm payrolls, unemployment, and inflation statistics, started its shutdown along with the rest of the government on Wednesday. That means theas scheduled on Friday. However, that highlights the uncertainty surrounding the shutdown; at any moment, politicians in Washington could reach an agreement on spending and reopen the government. It's not clear how soon after that point the job data will be released or if BLS will provide advance notice. The last shutdown, which lasted 35 days, still allowed the Department of Labour to post the data on its website. Given the lack of precedent, it's not clear when or how the data will be made available.

In the meantime, traders need to calculatelater this month, which is expected to be primarily based on the labour market data. At the last FOMC meeting, the Fed indicated that growing slack in the job market meant it needed to cut rates and would continue to ease monetary policy through the rest of the year. However, since then, there have been some positive signs in the market, with August job openings increasing for the first time in three months. The ADP report on Wednesday went in the opposite direction,, marking the most significant drop in employment since early 2023. The ADP figure is not considered predictive of the NFP figure but might be used to inform the market in the absence of the official number.

The Dollar Sinks Amid Soft Expectations

The consensus among analysts is that the September NFP figure will show a growth of 50k jobs, an increase from the 22k jobs added in the previous month. However, this is well below the replacement rate, which is estimated to be around 180K, indicating increasing looseness in the labour market. The unemployment rate is projected to stay unchanged at 4.3%. The dollar has weakened amid the uncertainty from the shutdown, allowing the EURUSD to drift higher.

EURUSD Consolidates in Pennant?

Fibre bounced off support at 1.1650 last week, with the upward leg pointing to a potential pennant pattern. The first leg down, however, is longer in magnitude and amplitude, suggesting a breakout in either direction in the short term, which is also signalled by a neutral RSI. If the price action turns bearish at 1.1700, a break of 1.1715 could expose 1.1650 once more.

Source: SpreadEx | EURUSD, 4-hour chart