Dollar Index Dips to 101.68 as Weak Payrolls Cool October Hike Bets

The US Dollar Index sits at 101.68, down 0.09% - a figure that reflects Friday October 2's last completed session still carrying through the weekend closure, not fresh Sunday trading, with cash FX shut until the Asian open. The retreat follows Friday's September jobs report: nonfarm payrolls rose just 29,000 against estimates of roughly 84,000-90,000, while the unemployment rate ticked up to 4.2% from 4.1%. The EUR and GBP desks flag the same mechanism - a broad, dollar-driven bounce after the miss, not currency-specific strength - while CAD is the exception, with USD/CAD still bid on a currency-specific mix of soft Canadian growth and weaker oil. Equities rallied hard on the print (S&P 500 +0.66%, Nasdaq +1.19%) and the VIX fell 6.59% to 15.31, pointing to a risk-on reaction even as the dollar eased.

Fed funds sit at 3.75-4.00% after the September 16 hike - the first since 2023, voted 12-0 - with most officials still projecting at least one more hike this year; the live question remains further tightening, not cuts. Friday's weak payrolls print trimmed market odds of an October hike, per desk notes, even as Treasury yields moved up modestly across tenors: the 10-year added 4.0bp to 5.277%, the 5-year 5.0bp to 5.055%, the 30-year 2.7bp to 5.630%, and 3-month bills 1.1bp to 3.993%. Separately, the Fed's Hammack said there is time to weigh the next rate move, per Investing.com Australia.

EUR/USD: 1.1252 (+0.08%), rebounding off Friday's 1.1221 low - its weakest since May 2025 - though still down more than 2% for September. GBP/USD: 1.3239 (+0.34%), bouncing with the broader dollar pullback; see the focus section below. USD/JPY: 157.84 (-0.15%), easing back after weakening past 158 on Thursday, with hot Tokyo core CPI of 2.7% y/y keeping yen-supportive BOJ hike bets alive. USD/CAD: 1.4249 (+0.19%), with the loonie near its weakest in about 12 weeks after eight straight losing sessions, pressured by soft Canadian growth and WTI crude's pullback to roughly $91/bbl.

GBP/USD rose 0.34% to 1.3239 in Friday's session, rebounding from Thursday's three-month low near 1.3193 - a drop driven by high global rates, oil-driven inflation fears and broader European risk-off. Friday's bounce was dollar-driven, not sterling-specific: September's weak US payrolls report pressured the greenback broadly, with no currency-specific UK catalyst behind the move. Desk notes call it a single-session rebound rather than a reversal - GBP/USD is still down about 2.1% over the trailing month and 1.8% over the year. The BoE held Bank Rate at 3.75% on September 17 by a 6-3 vote, with Megan Greene, Catherine Mann and Huw Pill dissenting for a hike to 4%, flagging inflation risk if Middle East conflict persists. Governor Andrew Bailey separately told the BBC the UK must prepare for market shocks from a possible AI-investment correction. No BoE meeting until November 5; next up is Monday's UK Services/Composite PMI, then Mann's Tuesday fireside chat.

Calendar data for Sunday itself was sparse - no scheduled releases were found, and the feed flagged delayed/limited parsing. The week's data starts Monday, October 5: Germany and Eurozone final September Services PMI (07:55/08:00 GMT), Eurozone Sentix Investor Confidence for October (08:30 GMT), Eurozone PPI for August (09:00 GMT), the UK's final Services/Composite PMI (~09:30 BST), the US ISM Services PMI, and a cluster of BOJ data releases in Tokyo (Sources of Changes in Current Account Balances projections at 08:50 JST; output gap, potential growth and labor market indicators at 14:00 JST) plus Japan's monthly Consumer Confidence. Later in the week: MPC member Catherine Mann speaks Tuesday, FOMC minutes land Wednesday, and Canada's Labour Force Survey for September is due Friday.