A weaker-than-expected US jobs report sent the dollar down against the pound, euro, and Australian dollar, raising doubts about the Federal Reserve's next move and rattling global currency markets.
September's jobs numbers landed with a thud. The Bureau of Labor Statistics said nonfarm payrolls grew by just 29,000. That was far below what most analysts expected. The unemployment rate ticked up to 4.2%. The number of unemployed Americans hit 7.1 million. These figures came out at 8:30 a.m. ET on October 2, 2026. Forecasts had pointed to a much stronger labor market. The miss was clear according to the BLS release.
The market reacted fast. The dollar dropped. The pound, euro, and Australian dollar all jumped. Investors started to rethink the odds of another Federal Reserve rate hike this month. Friday's data showed US employers added only 29,000 jobs in September. Banks had expected 90,000. Revisions cut another 60,000 jobs from July and August. The unemployment rate edged up from 4.1% to 4.2%. Annual wage growth slowed to 3%. ING analysts said markets are still betting on too many Fed hikes. They still see a December move as possible. The BLS said most major industries saw "very little change" in hiring. The slowdown was broad.
Currency pairs move on jobs data
Exchange rates shifted right after the numbers. The pound-dollar rate (GBP/USD) climbed to 1.3256, up 0.43%. The euro-dollar rate (EUR/USD) hit 1.1282, a 0.30% gain. The Australian dollar rose 0.64% to US$0.6973. The New Zealand dollar added 0.46% to US$0.5627. The US dollar barely budged against the Canadian dollar. USD/CAD stayed just above 1.4227 after a brief dip.
Bond yields fell. Two-year US Treasury yields dropped from 4.77% to 4.72%. Investors pulled back on bets for quick Fed tightening. Lower yields make the dollar less attractive. Other central banks, like the ECB and Bank of England, are not signaling big changes. The Fed's stance still drives global currency moves. The latest jobs data forced a rethink on US rates. The mood shifted. Fast.
Fed outlook: more questions, fewer answers
James Knightley, ING's chief international economist, said the jobs report backs up recent Fed signals. There is less pressure to raise rates in October. Knightley thinks only a strong September inflation reading-due October 14-could put a hike back on the table. ING still expects a December increase. But the weak jobs data has changed the debate. Reuters said several Fed officials now want to pause and wait for more data. The market slashed the odds of an October hike. At the start of the week, traders saw a 70% chance. After the jobs report, that dropped to 25% as covered by Reuters.
Wage growth was soft. Monthly gains were just 0.1%. The annual rate slowed to 3%. Knightley pointed out that the gap between job seekers and vacancies has closed. In early 2022, there were two openings for every job hunter. Now, that's changed. Wage pressure is fading. The quits rate is low. Pay growth could slow even more. The Fed will watch these trends closely as it decides what to do next.
Labor market sends mixed signals
The headline numbers were weak. But not every detail was negative. Manufacturing jobs rose for the fourth month in a row. The rise in unemployment partly came from more people joining the workforce. In September, 485,000 more Americans started looking for work. The participation rate went up to 61.8% from 61.6%. More people want jobs, even as hiring slows. The BLS said most sectors saw little change. The labor market is cooling. It is not collapsing.
Banks had expected better. Crédit Agricole forecast 90,000 new jobs and 0.2% wage growth for the month. Its unemployment call of 4.2% matched the result. JPMorgan thought hiring could surprise on the upside after the ADP report. The official data did not back that up. ING now questions whether markets are right to price in three or four more Fed hikes. There is little sign of wage-driven inflation. The Fed's next steps will be watched closely by traders and investors. The stakes are high.
For those following currency swings, a recent update showed how doubts about US policy have already capped the dollar's gains. That was before the latest jobs miss.
What it means for currency markets
The September jobs report has thrown new uncertainty into the outlook for US rates. The dollar's path is now less clear. The next inflation reading could decide what happens next. Softer hiring and slower wage growth may delay or shrink future Fed hikes. For now, the dollar's edge from higher yields has faded. The pound, euro, and commodity currencies are finding some relief.
Labor data matters for currencies. When job growth slows and pay rises less, the Fed may hold off on raising rates. That makes the dollar less appealing to investors chasing higher returns. But exchange rates are complicated. They reflect policy, expectations, and global risk appetite. One report can spark sharp moves. Sometimes, those moves don't last. Markets are on edge. The next few weeks will be tense.
