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Oct 02 - 12:55 PM

BofA: US September Labor Report & FX Market Scenarios

By eFXdata  —  Oct 02 - 10:45 AM

Synopsis:

Bank of America anticipates the US September labor report to show 150k nonfarm payrolls (NFP) with an unemployment rate of 4.2%, aligning closely with Fed forecasts.

Key Points:

  • The expected figures would maintain three- and six-month averages at approximately 130k and 140k, respectively.
  • The Fed is likely to view these results as consistent with their economic projections, leading to a modest adjustment in November cut expectations while keeping the possibility of a 50bps cut on the table.
  • If payrolls land around 150k, the USD may continue its trend, albeit at a slower pace.
  • Readings below 100k could further pressure the USD, although initial mixed outcomes are expected if discussions of a hard landing arise.
  • A weaker USD could emerge against higher-beta currencies (e.g., AUD, NZD, SEK, NOK) in a broader risk-off environment, while it may decline against safe-haven currencies like JPY, CHF, and possibly EUR.
  • Conversely, stronger readings exceeding 150k could indicate a robust labor market, prompting a significant reduction in anticipated Fed cuts. Given the market is currently pricing around 75bps of cuts for the remaining two meetings this year, such a scenario might lead to a broader USD pullback.

Conclusion:

Regardless of the report's outcome, BofA expects the overall downtrend for the USD to continue into next year as labor market cooling becomes more apparent.

Source:
BofA Global Research

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