It wasn’t resilient after all
Kevin Ford
The long-held narrative of a resilient U.S. labor market has been shattered. The Bureau of Labor Statistics (BLS) released a preliminary benchmark revision that revealed a staggering downward adjustment of 911,000 jobs between April 2024 and March 2025. This revision, which is nearly double the average over the past decade, signals that the economy added roughly 76,000 fewer jobs per month than previously reported, fundamentally reshaping our understanding of recent economic strength.
This new data suggests the post-pandemic expansion has stalled, not just slowed. On top of this, last Friday’s NFP report revealed a revised June 2025 figure showing a loss of 13,000 jobs, the first negative print since December 2020. While Health Care remains the lone area of strength, the weakness is far from isolated. Key sectors such as manufacturing, trade, and professional services are all contracting. The bulk of the downward revision, 880,000 jobs, was concentrated in the private sector, with government employment reduced by 31,000.
The sheer scale of this revision, which follows similarly large downward adjustments in 2023 and 2024, raises serious concerns about the reliability of the BLS’s monthly data. The Current Employment Statistics (CES) survey, which relies on a sample of about 121,000 businesses and government agencies, is facing growing challenges. Many firms fail to report data in time for the initial release, and late submissions are only incorporated in subsequent revisions or the annual benchmark. A major issue is the CES response rate, which has plummeted to 43% from 61% in 2016. This decline introduces a significant bias, as struggling employers are often less likely to participate in surveys, leading to a consistent pattern of downward revisions.
While markets initially seemed to shrug off the revision, a fragile narrative remains. The data adds pressure on the Federal Reserve ahead of its upcoming policy meeting next week. The potential for a stagflation scenario, a combination of a slowing labor market and persistent inflation, is a real risk. If Thursday’s Consumer Price Index (CPI) report comes in hotter than expected, investors may be forced to reconcile these conflicting signals, which could trigger a significant repricing of rate cut expectations and heightened market volatility. The odds of nearly three Fed rate cuts by the end of 2025 remain unchanged for now, but the latest data, if followed by a surprise CPI print, makes a stagflation scenario increasingly plausible.
No firepower for euro yet to reclaim July highs
Antonio Ruggiero
The euro had a soft session yesterday, dropping around 0.4% against the dollar at one point. Lingering political risk – specifically the loss of the confidence vote by the French Prime Minister – kept euro bulls from retesting the late-July high of $1.1789. A brief spike in oil prices also added pressure on the euro, following Israeli strikes on Doha, Qatar, which Israel claimed were “targeting the senior leadership of Hamas.” Higher oil prices tend to weigh on energy-importing currencies like the euro.
However, the currency managed to pare losses later in the session, as President Emmanuel Macron appointed Sebastien Lecornu as France’s new prime minister, tasking him with forming a government and securing support across party lines to pass the 2026 budget. The event helped ease investors’ concerns.
We now look ahead to tomorrow’s ECB policy meeting. The euro is unlikely to move significantly, as the options market shows 1-week at-the-money volatility has dropped sharply since last Friday’s NFP report – suggesting that US macro data continues to outweigh ECB rate developments for now.
Having said that, as we expect Lagarde to strike a steady tone, that may offer brief support to the euro. On the rate path, she’s likely to reiterate that the economy is progressing at a healthy pace. Recent macro surprises – such as improving PMIs and falling unemployment – should reinforce her conviction that the eurozone is in no rush to cut rates. That said, global uncertainty remains elevated, and with the EU-US trade deal still far from finalized, we anticipate a cautious tone, nonetheless.
We believe EUR/USD can hold above $1.17, supported by a more distinctively dovish stance from the Fed. Since the start of 2025, the pair has struggled to maintain that level under less supportive fundamentals, with the Fed remaining largely cautious throughout. Having said that, more meaningful strides toward reclaiming the July highs appear unlikely this week. The Fed’s policy meeting on 17th September seems a more probable catalyst for renewed upside momentum.
Pound’s disconnect between market positioning and price action
George Vessey
Sterling’s recovery from near $1.33 last week ran out of steam just shy of $1.36 yesterday, a one-month high, reversing sharply despite softer-than-expected U.S. payrolls data. One possible driver of the reversal: the rebound in oil prices, which tends to weigh on the pound via the UK’s energy import bill, while supporting the dollar through its petrocurrency status.
On the domestic front, UK retail sales offered a rare bright spot. Like-for-like sales rose 2.9% in August, well above both July’s 1.8% and the 2% consensus, according to the British Retail Consortium. With wage growth still outpacing inflation, this may boost near-term optimism around consumer sentiment. But it’s unlikely to shift the broader narrative.
Sterling remains constrained by structural headwinds. Economic growth is sluggish, inflation remains stubborn, and beyond relatively attractive yields, the pound lacks a convincing fundamental driver for sustained upside. Yet even elevated yields offer limited support when they stem from a stagflationary backdrop. In such an environment, higher rates reflect economic stress rather than strength – undermining investor confidence and dampening currency appeal.
Positioning metrics also point to downside risk. Since global central banks began tightening policy in 2022, GBP/USD has largely tracked shifts in aggregate investor positioning – reflecting broader sentiment toward risk, rates, and relative growth. However, recent data shows a notable build-up in bearish bets against sterling, which the currency pair has yet to fully reflect. This suggests a potential disconnect between market positioning and price action, leaving GBP/USD vulnerable to a catch-up move if sentiment continues to sour.
EUR/USD holding ~13% higher year-to-date
Table: Currency trends, trading ranges and technical indicators
Key global risk events
Calendar: September 8-12
All times are in BST
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
