Dollar Firms Near 102 as Fed Hike Odds Split, Loonie Slides on Jobs Miss

The US Dollar Index sits at 102.09, up 0.17%; at 04:00 Saturday in Sydney the implied New York time is Friday afternoon, with that session still roughly three hours from its 17:00 close, so Friday's figure can still move. Fed funds remain at 3.75-4.00% after the 25bp hike on September 16, the first hike since 2023, and most officials have projected at least one more increase this year -- the live question is further hikes, not cuts. That said, Fed Governor Waller said on October 8 that further hikes do not need to come at consecutive meetings, a remark the desk reads as opening the door to an October pause without abandoning the hike bias. Equities were firm (S&P 500 +0.46%, Dow +0.73%) and the VIX fell 3.63% to 14.85, a risk-on backdrop sitting alongside a broadly steady dollar.

US yields were mixed and modest on the day: the 10-year added 1.7bp to 5.248%, the 5-year rose 3.2bp to 5.023%, the 3-month added 1.4bp to 4.057%, while the 30-year was essentially flat, down 0.1bp to 5.605%. None of that qualifies as a large move on its own. The bigger repricing is in Fed-hike timing: Waller's October 8 comment that hikes need not be consecutive has markets pricing roughly 18% odds of an October hike against roughly 87% odds of one by December, per FXStreet -- a shift in when the next hike lands, not whether one comes. Separately, Trump has established a committee to investigate Fed Governor Lisa Cook, an added layer of political noise around the Fed that the desk is watching but cannot yet size for FX.

EUR/USD trades at 1.1190, down 0.19%, still pressured by French political and debt risk, even after ECB President Lagarde's dovish remarks pulled it off last week's 17-month low of 1.1161. GBP/USD is flat at 1.3227, down 0.02%, consolidating as UK fiscal concerns ahead of the October 28 Budget offset the softer-dollar pull from Waller's October 8 pause signal. USD/JPY is up 0.26% to 158.31, with the yen still pressured by the wide US-Japan rate gap and record NISA-linked outflows flagged by MUFG Research. USD/CAD leads the majors' moves, up 0.35% to 1.4275 after a weak Canadian jobs report.

USD/CAD is the day's standout, up 0.35% to 1.4275, still digesting Friday's Statistics Canada Labour Force Survey: September employment fell 68,300 versus a forecast gain near 9,000, unemployment rose to 6.5% from 6.4%, following a 41,700 loss in August. Losses were concentrated in public-sector health care, social assistance and education, plus manufacturing (-12,700) and youth employment (-48,000). Per Bloomberg, the loonie fell as much as 0.5% to 1.4299 on Friday, its weakest since April 2025, as the data cut odds of a Bank of Canada rate increase. Oil was mixed Friday -- Brent slipped 0.37% to $103.89 while WTI edged up 0.05% to $91.19 -- after Trump said US-Iran talks were productive and no strike was planned before the November 3 midterms, blunting what had earlier looked like a cleaner CAD-negative driver. No BoC decision occurred this week; the next is October 28, with Governor Macklem's press conference. Monday is a market holiday in Canada.

No major events are scheduled for today, Saturday, and the economic calendar feed itself flagged a possible delay; with Friday's US session still open into Saturday morning Sydney time, markets head into their weekend closure once it wraps. Looking to next week: Monday, October 12 is Canadian Thanksgiving, with the TSX, TSX Venture, TSX Alpha and Montreal Exchange closed and reopening Tuesday, October 13; the same day is the US Columbus Day holiday, which affects bond-market hours, and Japan's market is closed for the Health and Sports Day holiday. Further out, the next Bank of Canada rate decision is October 28 (9:45am ET) with Governor Macklem's press conference and Monetary Policy Report, the ECB's next decision is October 29, and the Bank of Japan meets October 29-30 with its quarterly Outlook Report. The next Bank of England decision is November 5.