US payrolls report puts October Fed hike 'to bed'; December remains Ebury’s base case

"We've seen a muted response in markets to today's US payrolls report. Headline job creation came in well below consensus, with a downward revision to the prior month's figure dragging the three-month average lower too.

"That said, the underlying pace of hiring remains healthy against a backdrop of shrinking labour supply, and still comfortably above the breakeven rate needed to keep up with labour force growth. The uptick in unemployment and the further easing in wage growth also point to a cooling rather than a collapse.

"The dollar's limited reaction reflects two things - the Fed's focus right now is squarely on inflation rather than employment, and expectations for an October hike were already fairly subdued, and in our view never particularly well-founded.

"We think today's data should put to bed any remaining talk of an October rate rise from the Fed. December remains our base case for the next move, though the recent spike in yields, and any progress in the Iran war negotiations between now and then, could yet throw further tightening into doubt."