This Friday, September 28 at 20:30, the US Department of Labor's Bureau of Labor Statistics will release the September nonfarm payrolls report. Of particular interest are the new nonfarm payrolls figure and the unemployment rate.
In August, new nonfarm payrolls came in at 162,000, a solid reading. However, the market consensus for September is only 84,000, roughly half of the August figure.
If the actual number matches expectations, it would suggest that the healthy state of the US labor market is not stable and could slip into low growth at any time, which would weigh on the US dollar index.
US Unemployment Rate
The US unemployment rate has been steadily declining, with the latest August reading at 4.1%, and the market expects the September figure to remain unchanged.
The unemployment rate measures the overall level of employment and carries more long-term guidance value than the new nonfarm payrolls data.
As seen in the chart above, since November 2025, the US unemployment rate has fallen from a peak of 4.5% and has since held steady at the low level of 4.1% for several consecutive months.
Given the low unemployment rate, we believe that even if the latest new nonfarm payrolls figure comes in well below the prior reading, it cannot be concluded that the US labor market is harboring hidden risks. Rather, it can be attributed to short-term disturbances.
Additionally, a low unemployment rate often leads to high inflation, because the working population can secure stable wage income. US average hourly earnings have continued to grow at a high annual pace, and American consumer spending power will keep rising.
A rise in CPI data would prompt the Federal Reserve to adopt a rate hike policy. The market expects the Fed to deliver a second rate hike within the year. Under such tightening expectations, the US dollar index will likely continue to strengthen.
According to CME FedWatch, the probability of a Fed rate hike in October has reached 68%, an extremely high level, which corroborates our rate hike judgment.
Wednesday: US PCE Data
On the last day of September, which is this Wednesday, the US Department of Commerce will release the September core PCE price index annual rate, with an expected reading of 3.3%, unchanged from the prior value.
The US PCE data is an inflation gauge frequently referenced by the Federal Reserve and is crucial for monetary policy decisions.
US CPI data and PCE data have strong resonance. The September CPI result has already been released, with the latest reading of 3.4% unchanged from the prior value, consistent with expectations for the PCE data.
Federal Reserve Chairman Kevin Warsh does not fully agree with the PCE data's assessment of the inflation situation, and he favors trimmed mean PCE data for judging inflation.
However, Kevin Warsh has also publicly stated that PCE remains the core indicator used within the Fed to assess the inflation situation.
As seen in the chart above, since March of this year, US PCE data has risen rapidly and has remained steadily above the 3.3% level for five consecutive months.
The Federal Reserve sets 2% as the standard for moderate inflation, and the current 3.3% core PCE growth rate clearly exceeds the target level. Combined with the recent continuous rise in PCE data, the Fed is bound to adopt tightening monetary policy to curb high inflation.
Considering that the US-Iran conflict broke out in March, and international oil prices surged during the same period, it means that the current high inflation problem in the US is mainly driven by rising energy prices.
We believe that only a lasting peace agreement between the US and Iran could reduce the potential high inflation risk in the US. Relying solely on the Fed's tightening monetary policy may not be sufficiently effective in curbing price increases, or may take effect very slowly.
Tuesday: RBA Rate Decision
This Tuesday at 12:30, the Reserve Bank of Australia will announce its September rate decision. The mainstream expectation is a 25 basis point hike, which would lift the benchmark rate to 4.6%.
In September, the ECB, the Fed, and the Bank of Japan all hiked rates by 25 basis points, with the same core driver: the high inflation risk caused by high oil prices. The RBA will likely follow the mainstream central banks in raising rates, for the same reason of curbing high inflation risk.
So far this year, the RBA has raised rates three times, with its first hike coming earlier than both the Fed and the ECB.
The RBA recognized early on the risk that high inflation could emerge, so it made preparations for rate hikes as early as possible.
In the second quarter of this year, Australia's quarterly CPI annual rate was 3.9%, well above the 2% moderate inflation standard, but below the prior value of 4.1%.
This means the RBA's rate hike policy will likely continue, while the high inflation risk has already been initially contained.
For the Australian dollar's value, tightening monetary policy favors a short-term rise in AUDUSD, but its long-term trend still depends on the Fed's monetary policy and the performance of the US dollar index.
Risk Warning, Disclaimer, and Special Statement: Markets carry risk, and investment requires caution. The above content represents only the analyst's personal views and does not constitute any trading recommendation. Please do not treat this report as the sole reference basis. At different times, the analyst's views may change, and updated content will not be notified separately.
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