Weekly economic and financial commentary: Faster rate cuts from the ECB likely

Wells Fargo Research Team Wells Fargo

Summary

United States: Jobs up, rate cut expectations down

Nonfarm payrolls blew past expectations in September, rising 254K. Upward revisions to the prior two months' data sweetened the headline gain and bucked the trend decline in hiring, while the unemployment rate unexpectedly ticked down a tenth to 4.1%. The solid jobs report tamped down expectations for another 50 bps rate cut at the FOMC's next meeting in November.

Next week: NFIB Small Business Optimism Index (Tue.), CPI (Thu.), Consumer Sentiment (Fri.)

International: Faster rate cuts from the ECB likely

In the Eurozone, the September CPI report showed further progress on disinflation for the region’s economy. The combination of slower inflation and more downside risks to GDP growth has compelled us to update our forecast to include a faster pace of ECB rate cuts through early 2025.

Next week: Japan Labor Cash Earnings (Tue.), Mexico CPI (Wed.), U.K. Monthly GDP (Fri.)

Interest rate watch: The outlook for longer-term interest rates

The FOMC cut the federal funds rate by 50 bps on Sept. 18, and other short-term interest rates promptly moved lower. However, longer-term yields generally have risen modestly since the FOMC reduced the federal funds rate a couple of weeks ago. For instance, the 10-year Treasury yield has climbed from 3.65% on September 17 to 3.95% today.

Credit market insights: On the road again; Student loan on-ramp comes to an end

As of the start of October, student loan borrowers who are late or miss payments can face credit reporting penalties, as the Biden administration’s year-long student loan “on-ramp” ended this month. For a portion of the over 40 million federal student loan borrowers, the end of the grace period means an additional financial hurdle for those who have missed payments.

Topic of the week: Middle East escalations capture attention

A further escalation of miliary conflict in the Middle East captured headlines for most of this week. As the conflict intensified, market participants were reminded that the ongoing conflict in the region does not yet have an end in sight one year on from the start of the war.

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Wells Fargo Research Team

Wells Fargo

GBP/USD strengthens beyond mid-1.3300s vs weak USD amid fresh Iran diplomacy hopes

The GBP/USD pair builds on Friday's modest bounce from a three-week low and gains strong follow-through positive traction at the start of a new week. This marks the second straight day of a positive move and lifts spot prices above mid-1.3300s during the Asian session amid a broadly weaker US Dollar.

EUR/USD climbs beyond 1.1400 as renewed Iran diplomacy hopes undermine safe-haven USD

The EUR/USD pair builds on a modest bullish gap opening and climbs back above the 1.1400 mark during the Asian session on Monday. The intraday move up is sponsored by a broadly weaker US Dollar, weighed down by renewed optimism over a diplomatic resolution to end a five-month-old US-Iran war.

Gold buyers try their luck on Mideast respite, Oil slump

Gold is off the highs but holds its bullish opening gap, while struggling near $4,100 early Monday. Despite the recent rebound, buyers trade with caution, keeping a close eye on the Middle East developments ahead of the US Federal Reserve policy verdict this week.

Cardano: Under pressure as bearish derivatives cap recovery

Cardano remains under pressure, trading lower at $0.165 on Monday after mild losses in the previous week. Weakening derivatives metrics and subdued momentum indicators suggest that ADA's upside move remains limited, keeping downside risks in focus. Derivatives data for Cardano shows bearish sentiment among traders.

Australian Dollar outlook: Chances of another rally won’t be decided in Canberra, but in Washington

The Australian Dollar rode a rollercoaster in the first half of the year, hitting a four-year high and then correcting. The currency enters the second half with an outlook full of uncertainty due to renewed hostilities in the Middle East, which clouds the inflation outlook and interest rates.

US Dollar mid-year outlook: Exceptional currency, exceptional risks?

The US Dollar enters the second half of 2026 in a markedly different position from a year ago. The King currency has recovered, reflecting persistent US inflation, changing expectations for Fed policy, geopolitical tensions and renewed demand for defensive assets.