After the September US jobs report published on Friday, we can forget about another outsized rate cut from the Fed. The data surprised positively across the board, with nonfarm payrolls growth rising, the unemployment rate declining, and average hourly earnings growth also accelerating. Additionally, last month’s numbers were generally revised higher to reflect a more robust labour market than previously thought, supporting the outlook for a so-called ‘soft landing’ for the US economy. The market’s reaction, meanwhile, was less surprising. The chances of another 50bp Fed rate cut before year-end were trimmed to zero, leading US Treasury yields to surge and the dollar index to climb to its highest levels since mid-August.
Fedspeak in the week ahead is unlikely to change the market’s mind that another jumbo rate cut is off the table. Fed policymakers have generally been more supportive of a gradual monetary easing cycle from here on out. This may also be reflected in the FOMC meeting minutes of the September meeting, which will be released on Wednesday. Then comes this week’s main international data release on Thursday in the form of US CPI numbers for September, which, despite more signs of disinflationary progress, will likely provide little in the way of shocking new information. All that to say the week ahead could provide the market with some time to consolidate after Friday’s shock, barring anything untoward happening in the Middle East.