Will the Real Jobs Market Please Stand Up

September 09, 2025
  • US Jobs revision today could show labor demand is weaker than previously thought, boosting Fed rate cut bets.
  • France-German bond yields spreads widen on heightened French political uncertainty. EUR/USD retreats slightly from a multi-week high.
  • Chile central bank expected to keep the policy rate unchanged at 4.75%.

US

USD is mixed and trading in line with narrowing US-G6 rate differentials. Ultimately, a more dovish Fed policy stance can drag USD to new cyclical lows. We expect the Fed to prioritize maximum employment over price stability within its dual mandate given that monetary policy is moderately restrictive.

Today, the Bureau of Labor Statistics (BLS) will release the preliminary benchmark revisions to net payroll growth for the 12 months ended in March 2025 (3:00pm London, 10:00am New York). Analysts estimates that monthly job creation will be reduced by an average of about 58k a month (or 700k annually), compared with the average monthly gain of 149k currently reported.

A larger downward revision to payroll growth would raise concerns about the US labor market and lift Fed funds rate cut bets against USD. Futures price in nearly 75bps of rate cuts by year-end and 140bps of easing in the next twelve months.

FRANCE

EUR/USD is trading on the defensive after hitting a multi-week high overnight near 1.1780. Technically, EUR/USD faces stiff resistance at 1.1789 (July 24 high) and 1.1829 (July 1 high). French OAT-German Bund yield spreads widened back to recent highs near 82bps on heightened French political uncertainty.

As was widely expected, French Prime Minister Francois Bayrou lost a confidence motion in parliament yesterday. President Emmanuel Macron's office said he would accept Bayrou's resignation and appoint a new prime minister in the coming days - his fourth prime minister since the June 2024 snap parliamentary election.

Regardless of the next prime minister, the political gridlock makes fiscal sustainability nearly impossible to achieve. France’s National Assembly is deeply divided, with no single party holding a clear majority. Bottom line: the political turmoil in France can further widen French OAT-German Bund yield spreads but it’s unlikely to meaningfully weigh on EUR as the situation remains country-specific and not systemic.

JAPAN

JPY is outperforming after yesterday’s initial kneejerk sell-off triggered by Japan Prime Minister Shigeru Ishiba’s resignation. The Liberal Democratic Party (LDP) will hold its leadership election on October 4 with campaigning set to start on September 22. Potential contenders include:

(i) Sanae Takaichi. Opposes BOJ rate hikes and advocates for higher government spending.
(ii) Shinjiro Koizumi. Fiscal and monetary stance not clearly defined.
(iii) Toshimitsu Motegi. Fiscal and monetary stance not clearly defined.
(iv) Yoshimasa Hayashi. Fiscal stance not clearly defined. Strong defender of BOJ independence.
(v) Takayuki Kobayashi. Growth-focused fiscal approach. Monetary stance not clearly defined.
(vi) Taro Kono. Fiscal conservative and advocates higher BOJ rates.
(vii) Katsunobu Kato. Fiscal conservative and strong defender of BOJ independence.

Whoever is the next prime minister faces deep legislative gridlock as the LDP does not have majorities in both bouse of parliament. LDP contenders may campaign on fiscally profligate pledges but pushing them through parliament will be difficult. Bottom line: we expect USD/JPY to remain within a wide 142.00-150.00 range over the next few months.

AUSTRALIA

AUD/USD is nearing key resistance at 0.6625, with a break above in sight. The RBA is on track to ease more cautiously than the Fed and global economic activity is resilient. Australia leading employment indicators argue for a gradual RBA easing path. The NAB Employment subindex increased to an 11-month high at 5.2 vs. 1.9 in July. The Westpac-Melbourne Institute Unemployment Expectations subindex rose 4.6% in September to its long run average, consistent with a stable rather than improving labor market.

Australia’s August job print, due September 18, will be a big driver of RBA rate expectations. The RBA flagged that the pace of decline in the cash rate will largely be driven by labor market conditions. In the meantime, RBA cash rate futures continue to imply 50bps of easing over the next twelve months.

CHILE

Chile central bank is expected to keep the policy rate unchanged at 4.75% (10:00pm London, 5:00pm New York). The bank’s quarterly Monetary Policy Report will be published on Wednesday. At the last meeting July 29, the central bank cut rates 25bps to 4.75% in a unanimous vote. The bank also left the door opened for more easing noting that if its baseline scenario materializes, the policy rate “will be approaching its range of neutral values [estimated to between 3.50-4.50%]” in the coming quarters. The swaps market fully price-in 50bps of total cuts in the next 12 months and the policy rate to bottom near 4.25%.


 

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