Weak US Jobs Report Shakes Fed Hike Expectations and Market Reactions

The first full week of October began with markets digesting a significantly weaker-than-expected US labor report. September's Nonfarm Payrolls increased by just 29,000, far below the anticipated 90,000. The unemployment rate also rose to 4.2%, while average hourly earnings grew by only 0.1% month-over-month. Revisions further worsened the picture, with August's payroll growth revised down from 162,000 to 133,000, and July and August combined losing 60,000 jobs.

The data sparked a shift in market expectations, with the probability of a Federal Reserve rate hike in October dropping from near 70% to around 22%. Treasury yields initially fell, but rebounded later, complicating the market reaction. The US Dollar Index briefly dropped but recovered as yields rebounded, while gold, Bitcoin, and US equities saw mixed movements.

Gold initially climbed from around $4,185 to above $4,227 before reversing sharply as Treasury yields rebounded. The S&P 500 jumped from around 7,675 to above 7,750, later settling near 7,720. Bitcoin also saw a brief rally before falling back towards $84,000. The yen's movement will be closely watched, with USDJPY consolidating after approaching 158.75.

Traders will focus on US services activity, Federal Reserve meeting minutes, and Treasury yields, alongside BOJ Governor Kazuo Ueda’s speech for signals on the USDJPY. The dollar's direction could shape major FX pairs, with EURUSD and GBPUSD potentially recovering if dollar selling resumes.