The US ADP employment change report showed only 89,000 jobs added in September versus an expectation of 150k with a prior reading of 180k. The knee-jerk reaction this morning has been a continuation of “bad news is good news,” i.e., worsening economic indicators reduce the likelihood that the Fed hikes again, increase the likelihood they cut sooner than expected, and, in turn, drives asset prices higher/the USD lower. The Bloomberg Dollar Index (BBDXY) is lower on the day, US equities higher, and treasury yields finally lower after the 30-year touched 5% for the first time since 2007.

That being said, ADP is just the opening act as the headliner, US Non-Farm Payrolls (NFP), are set to be released Friday morning at 8:30 am EST. ADP is often used as an early proxy for NFP, but it is worth noting the former often does not imply the latter. There have been many examples of the two releases diverging significantly for the same period, so it is worth taking today’s release with a pinch of salt.

EUR/USD has recovered above 1.0500 for the time being after trading as low as 1.0450 yesterday. Nonetheless, the cost to purchase a downside option versus an equivalent topside option in the pair has increased for all maturities, a sign that options traders are more concerned about a continued move lower in the pair versus a reversal higher.

USD/CAD is bucking the weak USD trend this morning somewhat as the pair trades higher on the day, hovering around yesterday’s highs. It may be that the market is still digesting recent hawkish comments by BoC deputy governor Vincent, weakening the Loonie against the USD. The economic highlight of the week will be on Friday at 8:30 am EST for Canada’s net Change in Employment figures.

GBP/USD is higher on the day in line with the weaker dollar across most G-10 peers, partially buoyed by comments Bank of England (BoE) Governor Bailey made regarding fighting inflation, saying that “the job is not done.” The pair is trading around the mid-1.2100 handle after trading as low as 1.2037 yesterday.

USD/MXN is back below its 200-day moving average this morning, a key level traders will be watching to see whether we are witnessing a true breakout or bouncing back from resistance.

USD/BRL breached its own 200-day moving average recently and seems to be holding on to that move higher. The pair opened the day with BRL gains that have mostly been reversed as concerns regarding US interest rates continue. Indeed, options traders are forecasting greater volatility ahead, with 1-month implied volatility rising to highs not seen in almost two months.