Overnight, payroll processor ADP said that US firms were shedding more than 11,000 jobs a week through late October, underscoring how hiring trends are evolving on a week-to-week basis and pointing to further weakening in a labour market being closely monitored by Federal Reserve (Fed) policymakers.
The dollar fell in the aftermath of the data release and struggled to recover its losses in early Asia trade on Wednesday, as traders once again ramped up bets of a Fed cut in December.
The euro was steady at US$1.1586 and sterling distanced itself further from a seven-month trough to last trade US$1.3149.
Against a basket of currencies, the US dollar languished near its lowest in more than a week and was last at 99.46.
“The alternative data, I think, overall points to a softer labour market picture… but whether we’re seeing a worsening deterioration in the US labour market, I think that remains an open question,” said Sim Moh Siong, a currency strategist at Bank of Singapore.
“I think the broad set of data suggests that the labour market is cooling, but only gradually so, and I think we should see some confirmation of that from the return of official data likely by next week, with the reopening of the US government.”
Traders are now pricing in close to a 68% chance that the Fed would ease rates by 25 basis points next month, up from around 62% a day ago, according to the CME FedWatch tool.
The benchmark 10-year US Treasury yield was down 3 bps at 4.0791% early in Asia, after trading was closed in the US on Tuesday owing to the Veterans Day holiday.
The two-year yield also fell roughly 3 bps to 3.5596%.
“We remain of the view that the balance of risks to the labour market, inflation and consumption favour a 25-bp rate cut next month,” said Brian Martin, ANZ’s head of G3 economics, in a note.
Fed policymakers have in recent times struck a more measured tone on further easing, citing the absence of key economic data due to the US government shutdown as one reason for caution.
However, a reopening could be imminent, as members of the House of Representatives headed back to Washington yesterday for a vote that could bring the longest shutdown in history to a close.
The Republican-controlled House is due to vote on Wednesday afternoon on a compromise that would restore funding to government agencies and end a shutdown that started on Oct 1.
The breakthrough has also lifted risk currencies like the Australian and New Zealand dollars, which were last up 0.02% each at US$0.6529 and US$0.5656, respectively.
The safe-haven yen has meanwhile been bruised from the overall risk-on market sentiment, last standing at ¥154.08 per dollar after sliding to a nine-month low of ¥154.495 in the previous session.
It has fallen nearly 0.5% for the week so far.
The yen also faced further headwinds from expectations of greater fiscal largesse in Japan, after Prime Minister Sanae Takaichi said she would work on setting a new fiscal target extending through several years to allow more flexible spending, essentially watering down the country’s commitment to fiscal consolidation.
She renewed calls for the Bank of Japan to go slow on interest rate hikes, in sharp contrast to the hawkish tilt from Fed policymakers.