Trading the Fed's Next Move: Positioning for October's NFP Showdown

With markets braced for a soft US payrolls print and the Fed in easing mode, USD pairs may be primed for outsized swings this week. Below is a concise, rules-based plan for EUR/USD and Gold CFDs under three NFP outcomes, plus a contrarian risk check.

TL;DR

• Markets brace for potentially weak September jobs data on 03 October 2025, with economists expecting modest job gains following August's 22,000 surprise. 

• The August 2025 Non-Farm Payrolls report showed a 22K rise, missing market expectation of 75,000 by a wide margin. With the Federal Reserve approving a quarter-point cut and signaling two more cuts before year-end, traders may position for USD weakness through EUR/USD longs, Gold accumulation, and equity index trades.

Fed Rate Cut Probability: Impact on Currency Markets"

The Federal Reserve's recent quarter-point rate cut has set the stage for what might be October's most significant trading event. The decision puts the overnight funds rate in a range between 4.00%-4.25%, with newly installed Governor Stephen Miran being the only policymaker voting against the quarter-point move, instead advocating for a half-point cut. This division within the Fed may signal more aggressive easing ahead, particularly if September's employment data disappoints as many economists expect.

August's payrolls increased by just 22,000 for the month, while the unemployment rate rose to 4.3%, according to a Bureau of Labor Statistics report. This marked deterioration in hiring momentum has persisted, with the summer months of June, July, and August seeing average payroll growth of just 29,000 per month, below the break-even level for keeping the unemployment rate steady.

The market's focus has shifted decisively toward labor market weakness. J.P. Morgan Global Research expects two more cuts in 2025, and one in 2026, with their chief U.S. economist, Michael Feroli, noting that "a major shift in labor market momentum would be needed to prevent another cut in October".

EUR/USD NFP Trading Strategy: Three Key Scenarios

Scenario 1: EUR/USD in a Dovish Fed Environment

What traders might watch:

The pair will likely become more volatile when September employment statistics fall short of market projections.

Market dynamics to consider:

• The interest rate differential between the Fed and ECB.

• The Dollar tends to weaken after the release of disappointing employment statistics.

Scenario 2: Gold's Response to Labor Market Weakness

What traders might watch:

The Federal Reserve's easing cycles throughout history have led to increased Gold market value. The way NFP data affects real yield expectations determines how Gold prices will react to the report.

Market dynamics to consider:

• The connection between unemployment statistics and safe-haven investment patterns.

• The current patterns of Gold accumulation by central banks.

Scenario 3: USD Index Reaction Patterns

Potential market behavior:

The Dollar Index tends to move in the opposite direction when employment data fails to meet expectations. 

How Different NFP Outcomes Might Impact Markets

Scenario A: Significantly Weak Print (Below Market Expectations): The market tends to buy Gold during this situation because investors need to re-evaluate Federal Reserve monetary policy plans.

Scenario B: In-Line with Consensus: The market shows minimal reaction when employment data aligns with expert predictions. The market needs to see wage growth and participation rate data before traders decide on market direction.

Scenario C: Positive Surprise: The Dollar tends to gain strength when employment statistics exceed market predictions. The Fed needs substantial changes in labor market performance to prevent an October interest rate cut, according to J.P. Morgan's Michael Feroli.

Contrarian Perspective: Alternative Market Views

The Global Investment Committee at Morgan Stanley predicts a 50-50 chance of further monetary easing despite market expectations for dovishness because nominal GDP growth exceeds 5% and unemployment remains at 4.2%. The core Consumer Price Index shows a 3.1% annual increase in July, while inflation continues to exceed the Federal Reserve's 2% target. (Source: Morgan Stanley)

What contrarian traders might monitor:

• USD/JPY dynamics as a potential indicator of risk sentiment.

• Gold resistance levels around $3,780-3,800.

• Equity index reactions to changing rate expectations.

Some market participants might look for signs that the Fed could pause its easing cycle if economic data improves, particularly given the persistent inflation concerns raised by several economists.

Risk Management Considerations

The Non-Farm Payrolls release creates major market fluctuations because of its impact on market stability. Major currency pairs demonstrate substantial price movements during the minutes following the Non-Farm Payrolls announcement. Market exposure decisions from traders should take into account the heightened market volatility that occurs during this period.

* Past performance is not indicative of future results. The above are only projections and should not be taken as investment advice.