Created
: 2025.10.02
2025.10.02 19:14
USD remains under downside pressure against most major currencies. Global equity markets continue to edge higher while bond markets are treading water. The September US Challenger job cut announcement data is today's highlight (12:30pm London, 7:30am New York), BBH FX analysts report.
"Yesterday, the private-sector ADP employment report pointed to worsening labor demand. ADP payrolls unexpectedly dropped -32K (consensus: +51k) in September after a revised -3k decline in August (prior: +54k). In the absence of the September nonfarm payrolls (NFP) report, due to the US government shutdown, the ADP data takes greater significance. While the ADP is narrower in scope than NFP, they often move in tandem."
"The September ISM manufacturing index suggests Fed policy is too tight. Factory activity shrank for a seventh consecutive month, albeit at a slower pace (49.1 vs. 48.7 in August). The details showed New Orders slipped back into contraction territory (48.9) after expanding in August (51.4). Export Orders fell deeper below the 50 boom/bust level indicative of renewed weakness in real manufacturing and trade industries sales. Employment recovered but remains firmly in contraction territory (45.3 vs. 43.8 in August). Prices Paid eased more than expected to an eight-month low at 61.9 (consensus: 62.7 vs 63.7 in August) signaling that upside risks to inflation are fading."
"Bottom line: we anticipate the Fed to turn more dovish by the time of the December FOMC meeting which can further weigh on USD and support the melt-up in equity markets. There's no evidence yet that erratic US trade and foreign policies are accelerating the dollar's declining role as the primary reserve currency. USD share of global FX reserves fell to 56.32% in Q2 vs. 57.79% in Q1 but that's largely due to the sharp decline in the dollar during this period. By holding exchange rates constant, USD share of global FX reserves would have fallen only slightly to 57.67% in Q2."
Created
: 2025.10.02
Last updated
: 2025.10.02
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