US Dollar: Softer jobs data shapes Fed path – UOB

UOB’s Alvin Liew highlights that weaker US September Payrolls and softer wage growth have reduced expectations for an October Federal Reserve rate hike, with markets now focused on September CPI. The report notes that the labor market lost momentum, but UOB still projects further tightening in December 2026 and 1Q 2027 before a prolonged hold through 2027.

Fed expectations cool after payrolls

"The unexpectedly soft Sep jobs report dampened confidence in US labor market momentum (following the temporary Aug NFP uplift) and lowered expectations of a near-term Oct Fed rate hike."

"According to Bloomberg WIRP, the probability of a Fed rate hike at the Oct FOMC meeting fell to below 20% (as of 5 Oct) following the payrolls report (vs 64% on 25 Sep) while markets still fully priced in a rate hike by end-2026."

"We have ruled out a back-to-back rate hike in the Oct FOMC, which falls less than a week from the midterm elections (3 Nov)."

"We expect two additional hikes, in Dec 2026 and 1Q 2027, thereafter on hold for rest of 2027."

"Surprisingly weak Sep NFP greatly reduced Oct Fed rate hike expectations, but the crucial test will be Sep CPI (14 Oct)."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)