Published:
Traders now see little chance of a Fed rate hike in October after weak jobs report
A weaker-than-expected September jobs report has pushed market pricing to make an October Fed rate hike “extremely unlikely”, with CME FedWatch showing only a 17% chance and traders still largely expecting a hike in December; the jobs cooling comes after softer PCE inflation data.
CNBC reports that a weaker-than-expected September jobs report has caused traders to drastically cut their odds of a Federal Reserve rate hike at the October meeting. CME’s FedWatch tool, based on 30-day interest rate futures, shows only a 17% chance of a quarter-point increase, down from around 36% a week earlier. On Kalshi, the probability of an October hike is described as about 18%, falling from almost 70% a week ago.
The US economy added only 29,000 jobs in September, well below the estimate for more than 80,000. CNBC links the recalibration to both this employment undershoot and to the release of softer-than-expected PCE inflation earlier this week, the Fed’s preferred gauge. It cites core PCE rising 3% in August, versus consensus for 3.3%.
Despite the near-term pullback in October odds, investors still appear to see December as the next window, with FedWatch implying more than 75% odds and Kalshi around 65%. The next scheduled Fed decision is at the end of a two-day meeting on October 28. For FX traders, the main watchpoint is whether incoming data continues to support a “wait until December” path, or whether it forces markets to move those probabilities again.
Why this matters for FX
This is directly relevant to FX because US labour-market weakness and cooler inflation data shift near-term Federal Reserve rate expectations. Lower odds of an October hike can reduce US interest-rate and yield expectations, loosening financial conditions and potentially weighing on USD versus peers, while “December still possible” keeps some upward rate pressure in the background. The key channel is rate-expectations and yield repricing into currency carry and relative interest differentials.