October US Nonfarm Payrolls growth expected to accelerate

• 65K is the expected increase in US Nonfarm Payrolls for October. That would follow September’s disappointing gain of 29K.
• At 4.2%, the Unemployment Rate is projected to remain steady.
• Despite widespread expectations for a 25 bps rate hike in December, the employment figures could affect the US Dollar’s valuation.

65K jobs are forecast to have been added in October. The United States (US) Bureau of Labor Statistics (BLS) will publish the Nonfarm Payrolls (NFP) report on Friday at 13:30 GMT. The projected gain compares with 29K in the preceding month. 

A 25 basis points (bps) increase in the policy rate by the Federal Reserve (Fed) in December remains the broad market expectation. However, details within the employment report could reshape views on the policy outlook for early 2027, influencing the US Dollar’s (USD) valuation.

Nonfarm Payrolls: Key Report Expectations

For October, investors anticipate an NFP increase of 65K, compared with September’s disappointing gain of 29K. Forecasts put the Unemployment Rate at an unchanged 4.2%. Monthly wage inflation, measured by the change in Average Hourly Earnings (AHE), is expected 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. Fed Chair Kevin Warsh characterised labour market conditions as “positive,” at the subsequent press conference and said policymakers’ discussions centred mainly 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 the US Dollar to enter a consolidation phase towards year-end after its steep rally since September. Reaffirming its outlook, the bank states 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 releases could 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 that backdrop, they “expect October NFP to remain subdued at 40k after job gains moderated to 29k in September,” supporting their view that weaker US figures would help prolong the Dollar’s post-election retreat.  

October US Nonfarm Payrolls: Implications for EUR/USD

Two years remained in Donald Trump's presidency as Democrats secured control of the US Congress. Their midterm election victories in both the Senate and the House prompted heavy US Dollar selling midweek. Following the election outcome, greater optimism over an easing of the Middle East conflict also drove a steep decline in crude oil prices, reducing concerns about persistent inflation. 

A further near-term Dollar correction has limited scope, according to ING analysts. They cite “a still-resilient US economy and at least one more rate hike from the Federal Reserve” as the main sources of support. The analysts nevertheless see potential for the balance of risks to change over the medium term, cautioning 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.” 

30K or below would be a disappointing NFP result. Such a reading could intensify USD selling 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 move at around 20%. Under this scenario, EUR/USD could extend its gains for the week.

An NFP reading above 80K, by contrast, would represent a substantial upside surprise and could initially lift the USD, triggering a downward correction in EUR/USD. That support might not persist, however. With key US inflation figures due next week, investors could avoid sizeable positions, limiting any lasting boost to the USD from the employment report.

For a short technical assessment of EUR/USD, FXStreet European Session Lead Analyst Eren Sengezer comments: 

“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).”