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, as the Dow Jones, S&P500 and Nasdaq indexes all hit fresh new all-time highs yesterday, 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.
Markets turn their attention to today’s U.S. Producer Price Index release, with both core and headline readings expected to post a 0.3% month-over-month gain. A surprise to the upside may offer the dollar a fleeting lift, but momentum could be short-lived. With Thursday’s data looming and consensus largely aligned with current forecasts, any rally risks running out of steam before the week is through.
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.
Steady decline in inflation
Kevin Ford
Mexico’s Consumer Price Index (INPC) registered an annual inflation rate of 3.57% in August 2025, marking a notable decline from the 4.99% recorded in the same month last year. On a monthly basis, the increase was a modest 0.06%. Core inflation, which excludes volatile items such as food and energy, came in at 4.23% year-over-year and 0.22% month-over-month, indicating that while underlying price pressures persist, they are gradually easing.
A breakdown of the CPI components reveals a more nuanced picture. The non-core price index fell by 0.47% in August, driven largely by a 1.07% drop in agricultural products. However, price movements were uneven across categories. Green chili and serrano chili saw sharp monthly increases of 16.71% and 34.94%, respectively, while beef and university tuition also contributed to upward pressure. In contrast, prices for chicken and tomatoes declined significantly, falling by 4.62% and 11.46%, respectively. These mixed signals underscore the complexity of Mexico’s inflation dynamics, where headline figures may mask volatility in specific segments.
The latest CPI print shows no clear impact from tariffs, largely due to the USMCA deal. While over 85% of Mexican exports are exempt from new tariffs, non-compliant goods still face a 25% tariff. Additionally, specific 50% tariffs are in effect on steel, aluminum, and copper. A broader 30% tariff was announced but suspended for 90 days, with that pause set to expire in late October. The overall effective tariff rate is not a fixed number, but a weighted average; a recent report from The Budget Lab at Yale estimated the post-substitution effective tariff rate for Mexico at 1.5%.
The steady decline in inflation toward Banco de México’s 3% target has given the central bank room to extend its monetary easing cycle. Banxico lowered its overnight interbank interest rate to 7.75% in August, marking its ninth consecutive rate cut since early 2024. The strength of the Mexican peso, often referred to as the “super peso”, has been buoyed by the historically high-interest rate differential between Mexico and the United States. However, as Banxico continues to cut rates, the peso’s resilience will increasingly depend on the pace of future rate adjustments, not only domestically but also from the Federal Reserve.
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 EST.
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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.
