**Credit: Original article by Mitrade**
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## Forex Market Analysis: Dollar Holds Steady Amid Mixed Global Data (October 8, 2023)
The global foreign exchange market entered the second week of October 2023 on a cautious yet resilient note. Market participants have been navigating through diverging economic signals, pivotal central bank decisions, and ongoing geopolitical risks, with the US dollar serving as a key barometer for risk sentiment and monetary policy expectations.
This in-depth analysis synthesizes the latest trends, data releases, and policy commentary impacting currency pairs, based on reporting from Mitrade.
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### US Dollar Steady Despite Mixed NFP Report
The US dollar index (DXY) maintained its strength last week, hovering near multi-month highs. Friday’s release of the September US Non-Farm Payrolls (NFP) report showcased robust headline job growth but was counterbalanced by weaker wage gains, leaving traders with a nuanced picture of the labor market.
**Key highlights from the US economic calendar:**
– **Non-Farm Payrolls:** The US added 336,000 jobs in September, significantly surpassing forecasts of around 170,000.
– **Unemployment Rate:** Held steady at 3.8 percent, bucking expectations for a slight tick lower.
– **Average Hourly Earnings:** Increased only 0.2 percent month-on-month, below the expected 0.3 percent and down from the previous month.
The robust jobs number—twice the consensus estimate—initially boosted bond yields and the dollar. However, the lack of wage pressure cast some doubt on renewed Federal Reserve tightening, leading to choppy price action across forex and asset markets.
### Federal Reserve: Waiting on the Data
The Federal Reserve continues to anchor global market psychology with its “higher for longer” policy stance on interest rates. Following September’s FOMC meeting, policymakers have signaled patience, tying further rate moves to the ongoing evolution of inflation and employment.
**Recent Fedspeak and market reactions:**
– Fed Governor Michelle Bowman and Dallas Fed President Lorie Logan reiterated support for additional tightening if inflation persists.
– However, several other officials, including Atlanta’s Raphael Bostic and San Francisco’s Mary Daly, have expressed caution, advocating for a data-driven and patient approach.
– CME’s FedWatch Tool pricing indicates traders see the Fed Funds rate remaining unchanged in November, with less than a 30 percent chance of a hike in December.
This backdrop has fueled volatility in US Treasuries, with the 10-year yield hitting the highest level since 2007 (~4.89 percent) before retracing as wage growth disappointed.
### Euro and Sterling Struggle on Rate Path Divergence
Across the Atlantic, the euro and British pound continue to trade with a heavy tone, pressured by slowing growth and diverging monetary policy outlooks relative to the US.
#### The Euro’s Headwinds:
– The EUR/USD pair remains pinned below 1.06.
– Eurozone inflation cooled to 4.3 percent year-on-year in September (the lowest in two years), strengthening the case for a pause by the European Central Bank (ECB).
– German manufacturing activity remains in contraction, weighing on sentiment.
– ECB Governing Council members have suggested the recent 25 basis point rate hike may be the last for this cycle unless inflation re-accelerates.
#### The Pound’s Struggles:
– GBP/USD has fallen from above 1.26 in late summer to below 1.22.
– The Bank of England (BoE) left rates on hold at 5.25 percent in September and signaled it may be finished tightening unless there is strong evidence of persistent inflation.
– UK GDP growth remains tepid, and inflationary pressures are slowly receding.
#### For both the euro and the pound:
– Anemic economic activity and peaking rate expectations leave downside risk unless the US dollar weakens materially or European data surprises to the upside.
### Japanese Yen
Read more on GBP/USD trading.