Soft Jobs Report Cools Fed Hike Bets; Dollar Index Eases to 101.67

The Dollar Index sits at 101.67, down 0.10%, reflecting Friday's completed US session now carrying through the weekend closure window — it's Saturday, October 3 in Sydney, with cash FX shut until Sunday evening New York time. The index had been trading near a 17-month high amid a broader global bond-market rout before Friday's US jobs report knocked it lower: September nonfarm payrolls rose just 29,000 against a consensus near 90,000, with unemployment at 4.2%. FXStreet reported the index dropping from near 102.10 to below 102.00, around 101.80, in the immediate aftermath; it has eased a little further since. Reuters framed the report as sending markets higher, while CNBC noted traders now see little chance of a Fed rate hike in October.

The Fed funds target stands at 3.75-4.00% after a 25bp hike on September 16 (12-0 vote), with most officials having projected at least one more hike this year. Friday's payrolls miss - 29,000 jobs added versus roughly 90,000 expected, with July-August revised down a combined 60,000 and unemployment at 4.2% - has shifted that conversation: CNBC reports traders now see little chance of an October hike. Treasury yields moved modestly on the day: the 10-year added 4.6bp to 5.283%, the 5-year 5.9bp to 5.064%, the 30-year 3.1bp to 5.634%, and the 3-month 1.3bp to 3.995%. FOMC minutes from the September 15-16 meeting are due Wednesday, October 7.

EUR/USD trades at 1.1255, +0.11%, rebounding from a multi-month low near 1.1221-1.1237 (the lowest since May 2025) hit earlier this week, lifted by the payrolls miss but capped by France's fiscal strain and September euro-area inflation at 3.8%. GBP/USD is at 1.3237, +0.32%, bouncing off four-week lows near 1.3180 hit Thursday, though sterling remains inside a five-week losing streak with 30-year gilts above 6%. USD/JPY sits at 157.82, -0.17%, with the yen supported by Tokyo's core CPI rising to 2.7% y/y. USD/CAD trades at 1.4255, +0.23%, extending a slide to roughly a 12-week weak point for the loonie as Canadian growth stalls.

EUR/USD trades at 1.1255, up 0.11%, rebounding from a multi-month low near 1.1221-1.1237 - the lowest since May 2025 - hit earlier this week. The desk calls Friday's bounce dollar-weakness-driven rather than euro strength: the payrolls miss did the lifting, not the eurozone. Headwinds persist: France's debt has reached a record 119% of GDP, with Finance Minister Roland Lescure saying the 2026 deficit will exceed 5%. Eurostat's October 2 flash estimate showed euro-area inflation accelerating to 3.8% in September from 3.2% in August, the highest since 2023, driven by an 18.8% jump in energy prices. ECB Executive Board member Isabel Schnabel warned the ECB should not simply 'look through' the energy shock, though markets price only around an 18% chance of an October ECB hike per futures-implied pricing (some desks nearer 29%). Monday brings US ISM Services PMI and the ECB's Frankfurt conference.

Monday, October 5: US ISM Services PMI; the ECB's Conference on Monetary Policy 2026 opens in Frankfurt (October 5-6) with policymaker speeches; UK S&P Global/CIPS Services and Composite PMI at 09:30 BST; Japan Consumer Confidence for September; Fed's Goolsbee speaks. Wednesday, October 7: FOMC minutes from the September 15-16 meeting. Thursday, October 8: the ECB's account of its September Governing Council meeting. Further out: Canada's Labour Force Survey for September is due October 9, the Bank of Canada's next rate decision is October 28, the UK's Autumn Budget is also October 28, the BoE's next decision is November 5, and the BOJ meets October 29-30 with its quarterly Outlook Report.