Payrolls beat forecasts at 165K as the dollar firms ahead of a pivotal CPI week

The week's most important economic number arrived on Friday, and it was a surprise. The US economy added 165K jobs in October, against a forecast of 65K and 60K the month before. The unemployment rate edged down to 4.1%, below the 4.2% that economists expected.

CNBC summed it up: the economy added "way more than expected." Consumers also sounded less gloomy. The University of Michigan's preliminary sentiment reading for November came in at 51, above the 48 forecast and up from 46.3.

Not every indicator was as strong. Earlier in the week, the ISM services index for October printed 54.5, slightly below the 54.8 forecast and down from 54.9. And CNBC flagged "a disturbing employment trend" hiding beneath the headline numbers.

The dollar responds

Currency markets reacted to the strength. Investing.com reported that the dollar jumped after the payrolls report. By the close, the US dollar index was up 0.71% on the day at 102.290, taking its gain for the year to 4.13%.

The euro fell 0.73% to $1.1137 and the pound 0.75% to $1.3347, while the dollar rose 0.55% against the yen to 158.53. The US 10-year Treasury yield ended the week at 4.861%.

Central banks lean hawkish

The policy backdrop has been shifting. In Europe, flash euro-zone inflation for October came in at 4%, in line with forecasts and up from 3.8%. In London, the Bank of England's interest rate decision on Thursday took Bank Rate to 4% from 3.75% — a rise of 0.25 percentage points, as forecast.

In the United States, the message from at least one Federal Reserve official was firm. CNBC reported that Americans are on a "treadmill of high inflation" and more rate hikes are likely, according to the Fed's Daly. In Japan, Investing.com reported that BOJ chief Ueda sees "some upside risks" to inflation.

Why Tuesday matters

That makes next week's US inflation report the key event on the calendar. Forecasts for October point to:

• Headline CPI: 3.9% year on year, up from 3.7%, and 0.3% month on month after 0.6%.
• Core CPI: 2.8% year on year, up from 2.6%, and 0.2% month on month after 0.3%.

A reading in line with those forecasts would mean annual inflation is still rising. The data lands after a volatile week for equities, in which the S&P 500 lost 3.33% and the VIX volatility index rose 39.12%.

What to watch

• Monday, 01:30 UTC: China's October inflation rate (forecast 0.8%, previous 0.9%).
• Tuesday, 03:00 UTC: China's October trade figures, with exports forecast up 33% year on year after 36.3%.
• Tuesday, 13:30 UTC: US CPI for October.
• Thursday, 07:00 UTC: UK third-quarter GDP, forecast to grow 0.7% quarter on quarter after 0.4%.
• Friday, 13:30 UTC: US producer prices, forecast up 0.4% month on month after 1.3%.

Analysis by Elena Marchetti, written with AI assistance from live market data (source: TradingView) and attributed third-party headlines. For information only — not investment advice.