Global FX: Payrolls a setback to USD; still constructive on carry post-JPY intervention
At a Glance
Lead — The dollar appears under pressure following disappointing U.S. non-farm payroll data, which raises concerns about growth and inflation outlook. Per the full note , the desk interprets the weak jobs print as a setback for the dollar's tactical upside amid mixed economic signals. The focus is also on the resilience of carry trades, particularly following recent JPY interventions. With no major catalysts on the horizon in the coming month, market participants may navigate these headwinds cautiously.
Key Takeaways
- 01Disappointing NFP signals a setback for the dollar's strength amid mixed economic signals.
- 02Economic indicators such as CPI and PCE heighten concerns about growth, supporting a bearish sentiment.
- 03Focus remains on the carry trade's resilience, especially post-JPY interventions.
- 04With no major catalysts in the next month, caution prevails among market participants.
Full Analysis
What the desk is arguing
The desk argues that the recent non-farm payroll (NFP) numbers signal a significant setback for the U.S. dollar, primarily due to the weak demand and supply signals indicated by the data. According to JPMorgan, despite private payrolls showing an addition of only 30,000 jobs, the overall print reflects a worrisome trend, especially as the unemployment rate dropped amid a declining participation rate.
Supporting this view, the commentary highlights that although previous economic indicators suggested some strength, the consistency in negative surprises surrounding key metrics like CPI and PCE suggests a frail economic backdrop. The fall in the unemployment rate was overshadowed by signals pointing to weaker labor demand, leading to a bearish outlook for dollar strength in the near term.
Where it sits in our coverage
Our consensus target for USD/EUR stands at 1.075, with a range between 1.04 and 1.12. Current projections from firms include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)
This analysis aligns with jpmorgan's more cautious stance, suggesting a defensive approach given the recent economic data. The desk's view appears to echo the lower end of the target range, indicating a bearish sentiment against the dollar relative to the Euro.
How other firms see it
Many firms, including jpmorgan, continue to bearish on the dollar, reflecting similar concerns regarding economic resilience. In contrast, firms like bofa see potential for dollar recovery in the longer term, indicating a divergence in outlooks.
Traders should monitor the EUR/USD trajectory, which may exhibit more volatility aligning with anticipated ECB policy decisions amid parallel U.S. economic developments. Watch for spillover effects on other pairs such as USD/JPY following recent interventions.
Market Implications
Keep an eye on critical support levels around 1.04 for potential breaks or rebounds in the EUR/USD. The upcoming economic releases related to inflation could also be pivotal in reshaping expectations around Fed policy.
From the original
This week, our Global FX Strategists assess the impact NFP for the dollar in the wake of last week’s FOMC outcome and JPY intervention. We also expand on the carry trade’s resilience despite yen vol, and conclude with the latest news from the Euro bloc of currencies. Speakers: Pa
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