Nonfarm payroll data shows that 12,000 jobs were added in October, far short of the expected 106,000. This data points to a potential weakness in the labor market. On the other hand, the unemployment rate remained unchanged at 4.1%, in line with expectations. Wage inflation has risen slightly, with the average hourly wage rising to 4%, up from the previous 3.9%. The ISM Manufacturing PMI also fell to 46.5, indicating a deeper contraction in industrial activity than expected. However, the services PMI painted a more optimistic picture, rising to 54.8. This indicates strong expansion in the services sector. These mixed signals have fueled market expectations of upcoming rate cuts. A cut of 25 basis points is expected next week, with a high probability of a further cut in December.
Weaker-than-expected labor market data and the downturn in manufacturing highlight concerns about economic growth. However, the robust performance of the services sector and persistent wage inflation limit the extent of these pressures. The release of this employment data caused the US dollar (DXY) to fall in the first hour, but the decline was capped by strong buying pressure, leading to a rally in the final hours before the market close. The high volatility of the US dollar is due to the uncertainty surrounding the upcoming US elections, which will take place next week. In addition, increased tensions between Iran and Israel in the run-up to the election results are further intensifying market volatility. Reports, such as news of Iran preparing to attack Israel, are escalating tensions in the region.