Week in review
Week of 5 October: a hawkish Fed, a Canadian jobs shock
The Fed minutes pointed to another hike by year end, ISM services prices hit their highest since 2022, Canada lost 68,000 jobs, US consumer sentiment fell to 46.3, EUR/USD posted a fifth weekly loss, and what the week meant on a challenge account.
On Monday we listed the week's events: ISM services, the minutes of the Fed's September hike, Canadian jobs and US consumer sentiment. Here is how they actually came in. The dollar stayed firm all week, yields held near their highest in more than two decades, and oil stayed above $100. Prices below are as of Friday afternoon New York time, around the end of the week's last session.
The week's data
| Release | Expected | Result |
|---|---|---|
| US ISM services PMI, September (Mon) | 55.1 | 54.9, prices paid 74.0 |
| RBI rate decision (Wed) | a hike to 5.50% | 5.50%, a 25 bp hike, unanimous |
| FOMC minutes, September meeting (Wed) | - | most saw another hike likely by year end |
| US initial jobless claims (Thu) | 200,000 | 197,000 |
| Canada employment change, September (Fri) | +9,500 | −68,000 |
| Canada unemployment rate (Fri) | 6.5% | 6.5% |
| University of Michigan sentiment, October, preliminary (Fri) | about 47.6 | 46.3 |
Monday: services cool, prices do not
The ISM services index slipped to 54.9 from 55.4, close to expectations and still in expansion. The prices paid component told a different story. It rose to 74.0, its highest reading since July 2022, following last week's jump in the manufacturing prices index. Employment in services edged back above 50, to 50.1.
Wednesday: the minutes and a hike in Mumbai
The Reserve Bank of India raised its repo rate to 5.50%, its first hike since February 2023, citing higher oil prices and pressure on the rupee.
In the evening the Fed published the minutes of its September meeting. Most participants judged that another increase in the target range would likely be appropriate by year end. Markets had expected a hawkish tone, so the reaction was modest: the dollar index rose about 0.4% on the day, to near 102.3, and the yen weakened against the dollar into Thursday.
Thursday: layoffs still low
Initial jobless claims fell to 197,000, below the 200,000 expected and under 200,000 for a fourth straight week. The US labour market keeps hiring little but laying off little, which leaves the Fed's October decision open.
Friday: Canada and US sentiment
Canada's jobs report was the surprise of the week. Employment fell by 68,000 in September, the second monthly drop in a row, against a small gain expected. The unemployment rate rose to 6.5%, as forecast, mainly because fewer people were looking for work: the participation rate fell to 64.8%, its lowest since 1997 outside of 2020.
Ninety minutes later, the University of Michigan survey showed US consumer sentiment falling to 46.3 from 48.1, below forecasts. Year-ahead inflation expectations rose to 4.7% and long-run expectations to 3.5%, the part of the survey the Fed watches most closely.
Yields, the dollar and major pairs
The US 10-year yield reached its highest level in 24 years earlier in the week and stood near 5.25% on Friday. The 2-year was near 4.78%.
- EUR/USD, last Friday
- about 1.125
- EUR/USD, weekly low
- about 1.1161
- EUR/USD, Friday afternoon
- about 1.121
- Dollar index, Friday
- near 102.40, after an 18-month high of 102.54 on Monday
EUR/USD fell for a fifth straight week, with oil above $100 weighing on the euro area outlook. USD/JPY traded near 158.50 after the minutes, held back by talk of a Bank of Japan hike and by the risk of intervention.
Gold, oil and stocks
Gold fell to a nine-week low on Thursday, then rebounded on Friday as yields and the dollar eased. It traded near $4,198 an ounce on Friday afternoon, up about $66 on the day.
Oil stayed above $100. Brent rose 4% on Thursday to close at $104.28, as attacks on tankers in the Strait of Hormuz and a storm affecting Gulf Coast production added to supply worries. It eased to around $103 on Friday after the US President said there would be no attack on Iran before the 3 November midterm elections, but stayed on course for a weekly gain.
Stocks recovered from a tech-led sell-off on Thursday. On Friday the S&P 500 rose 0.6% to 7,811.54, the Nasdaq gained 0.6% and the Dow 0.8%. The S&P 500 finished the week about 1.2% higher.
What the week meant on a challenge account
- The release that surprises is not always the one you watched. The Fed minutes moved markets less than expected. Canada's jobs report, a smaller event on most calendars, came in about 77,000 jobs away from forecasts. Check the restricted event list in your dashboard for every release in your pairs, not only the US ones (Challenge Rules 6.5).
- No bracketing the release. Trading Canada's jobs report on your own view is allowed. Placing a buy stop and a sell stop around it to catch the first spike in either direction is news bracketing, and it is prohibited (Challenge Rules 7.2(a)).
- Gold at size. Gold rose about $66 on Friday. On one lot that is $6,600, more than three times the $2,000 daily room on a $50,000 Sprint. See why 1% risk is a quarter of your day.
- Oil headlines arrive at any hour. Brent moved about $4 on Thursday on Middle East and weather news, not on a scheduled release. On one lot of 1,000 barrels that is about $4,000. Spreads and slippage around such moves go into floating equity, which is what the daily limit watches (Challenge Rules 6.8).
- The weekend. Positions can be held over the weekend, and the daily limit applies on weekends too (Challenge Rules 6.6). With talks over the Strait of Hormuz still open, a gap at Monday's open counts like any other move. See how the daily drawdown limit works.
Next week
US consumer prices for September are due on Wednesday 14 October, the last inflation report before the Fed's 28 October meeting. A full preview of the week's events comes on Monday.
This article is market commentary for information only. It is not a forecast, a recommendation or financial advice, and prices are approximate, taken from public market reports at the time of writing. VFUNDED provides simulated trading evaluations: trading activity is simulated and performance rewards are not guaranteed.