Will US Nonfarm Payrolls growth pick up in October as expected?

• Expectations point to a recovery in US Nonfarm Payrolls growth to 65K in October after September’s disappointing gain of 29K.
• Forecasts put the Unemployment Rate at an unchanged 4.2%.
• Despite widespread market expectations of a 25 bps rate hike in December, the employment figures could affect the US Dollar’s valuation.

With US job growth expected to pick up to 65K from the previous month’s 29K, attention turns to the October Nonfarm Payrolls (NFP) report. The United States (US) Bureau of Labor Statistics (BLS) is scheduled to publish the figures on Friday at 13:30 GMT. 

The US Dollar’s (USD) valuation could respond to details in the employment report that reshape market participants’ views on the policy outlook for early 2027. This is despite broad expectations that the Federal Reserve (Fed) will increase its policy rate by 25 basis points (bps) in December.

Could the Nonfarm Payrolls report reshape expectations?

An October NFP gain of 65K is anticipated by investors, compared with September’s disappointing increase of 29K. Alongside expectations for an unchanged Unemployment Rate of 4.2%, monthly wage inflation, measured by the change in Average Hourly Earnings (AHE), is forecast to accelerate from 0.1% to 0.3%.

Following its October policy meeting, the Fed kept the policy rate within the 3.75%-4% range, in line with expectations. Addressing the subsequent press conference, Fed Chair Kevin Warsh characterised labour market conditions as “positive,” and said policymakers’ discussions were centred primarily on the price stability mandate. A material repricing of next month’s Fed rate decision therefore appears unlikely without a substantial downside surprise in the employment figures.

TD Securities expects consolidation into year-end to follow the US Dollar’s steep advance since September. Reaffirming its position, the bank says that “after a sharp rally since September, our base case has been for the USD to see a modest relief selloff into year-end, similar to how the USD had performed following the 2018 US midterm election.” Forthcoming labour market figures may prove decisive, according to its strategists, who note that “a lower-than-consensus payrolls number could provide an additional catalyst for the USD retracement to take shape.” Against this backdrop, they “expect October NFP to remain subdued at 40k after job gains moderated to 29k in September,” supporting the argument that weaker US figures would prolong the Dollar’s post-election retreat.  

Could October US Nonfarm Payrolls extend EUR/USD’s gains?

Heavy selling hit the US Dollar in midweek trading as optimism over easing tensions in the Middle East grew following the midterm election outcome. Democrats won both the Senate and the House, securing control of the US Congress for the final two years of Donald Trump's presidency. Hopes of a de-escalation after the elections also drove a sharp decline in crude oil prices, alleviating concerns about persistent inflation. 

A deeper near-term correction in the Dollar remains limited in scope, according to ING analysts, who cite “a still-resilient US economy and at least one more rate hike from the Federal Reserve” as important sources of support. Over the medium term, however, they caution that the risk balance could change, noting that “the Dollar could see a little more weakness into 2027, however, if an emboldened Democratic Party takes greater issue with Republican policy, including deregulation and the AI build-out.” 

Further weekly gains in EUR/USD could follow a disappointing NFP reading of 30K or below. Such an outcome could intensify selling in the USD ahead of the weekend by prompting markets to rule out a January Fed rate increase. The CME FedWatch Tool currently puts the probability of that hike at around 20%.

An NFP figure above 80K, by contrast, would represent a sizeable upside surprise and could initially lift the USD, pushing EUR/USD into a downward correction. Any lasting boost to the Dollar from the employment figures could nevertheless be limited if investors avoid sizeable positions before next week’s key US inflation releases.

For a short technical assessment of EUR/USD, Eren Sengezer, European Session Lead Analyst at FXStreet, highlights the following: 

“The near-term technical outlook suggests that EUR/USD is struggling to complete a bullish reversal. The pair holds above the 20-day Simple Moving Average (SMA) but the Relative Strength Index (RSI) indicator on the daily chart stays slightly below 50.”

“On the upside, 1.1350 (static level, 50-day Simple Moving Average (SMA), former support) aligns as the first resistance level ahead of 1.1420 (100-day SMA). A daily close above the latter could attract technical buyers and open the door for an extended bullish action toward 1.1540 (200-day SMA).”

“Looking south, the first support level could be spotted at 1.1130 (lower arm of the Bollinger Bands) before 1.1000 (static level, round level).”