Rate Alert: US Non-Farm Payrolls slowdown sparks dollar slide

Rate Alert: US Non-Farm Payrolls slowdown sparks dollar slide

The latest US non-farm payrolls report showed just 22,000 new jobs added in August, significantly below forecasts of 75,000. The three-month average now sits below 30,000, and the unemployment rate has nudged up from 4.2% to 4.3%. Taken together, it paints a picture of a cooling labour market.

What does this mean for interest rates?

The Federal Reserve’s next meeting is scheduled for Wednesday 17 September, and today’s data has increased the likelihood of a 25bp rate cut. Some desks are even pricing in a 50bp cut, especially with US CPI inflation data due on Thursday 11 September, which could be a potential catalyst if inflation shows further signs of softening.

Market reaction: USD weakens across the board

The USD has weakened by around 0.75% against both the GBP and EUR, with similar movements across other major currencies. GBP/USD is now comfortably trading above 1.3500, despite ongoing concerns around the UK’s fiscal outlook and political uncertainty under the Labour government.

What we’re watching next

• Thursday’s US CPI data: A softer inflation number could drive expectations for a more aggressive Fed cut.
• Fed commentary: Any dovish signals ahead of the FOMC could compound USD weakness.
• GBP resilience: Sterling is showing notable strength today; however, ongoing uncertainty in the run-up to the Autumn Budget could cap further gains.