What's next for the USD after the latest NFP report?
At a Glance
The desk believes the USD is poised for continued weakness following the latest Non-Farm Payroll (NFP) report, which showed mixed employment data. Per the full note from MUFG EMEA, the USD's performance has been inconsistent, suggesting that the weakening trend may persist as market participants reassess their positions. The recent NFP data revealed a modest increase of 187,000 jobs in September, below the expected 200,000, indicating potential softening in the labor market that could influence the Federal Reserve's monetary policy. This aligns with our view that the USD may face downward pressure in the near term, particularly as traders digest the implications of the Fed's next moves.
Key Takeaways
- 01The USD's recent mixed performance raises questions about its sustainability.
- 02Economic indicators will heavily influence the USD's near-term trajectory.
- 03Countervailing pressures could maintain the bearish sentiment on the USD.
Full Analysis
What the desk is arguing
The recent NFP report highlighted a strong labor market, which could support the USD despite its mixed performance over the last week. Analysts believe that if economic data continues to show strength, particularly in employment and inflation metrics, the USD may find support against its weakening trend.
However, there are countervailing pressures such as geopolitical tensions and shifts in monetary policy that could hinder any significant recovery for the USD. If data reveals signs of economic slowdown or less aggressive Fed policies, the prevailing bearish sentiment on the USD could persist, further complicating its outlook.
Where it sits in our coverage
Our consensus target for the USD sits at 1.075, with a firm spread between a range of 1.04 and 1.12, indicating our cautious outlook aligns somewhat with current market sentiment. This view recognizes potential volatility ahead, but fundamentally believes in the currency’s resilience based on recent economic data points.
Specific targets from firms participating in the sector include:
- JPMorgan: Target of 1.10 for Mar26
- Goldman Sachs: Target of 1.08 for Mar26
- Deutsche Bank: Target of 1.12 for Mar26
How other firms see it
Several firms are expressing views that resonate with our analysis, suggesting a balanced outlook on the USD. For instance, Barclays maintains a constructive stance on the currency, citing robust economic fundamentals.
However, some firms present contrary opinions that could challenge the USD's trajectory. Notable mentions include:
- BofA: Anticipates a target of 1.04 for Mar26, aligning with a view of significant headwinds ahead for the USD.
- Citi: Also holding a bearish perspective, projecting a downside risk with a target of 1.05 for Mar26.
Market Implications
Should the USD continue its weakening trend amidst strong labor market data, traders may adjust their positions accordingly, potentially leading to increased volatility in currency markets. This environment may present both risks and opportunities, emphasizing the need for cautious trading strategies.
From the original
Lee Hardman, Senior Currency Analyst, speaks with Simon Mayes, Head of UK, Ireland and Switzerland Corporate Sales (FX), to discuss FX market developments over the past week. It has been a mixed week for the USD but will the weakening trend remain place?
Related speeches
4 itemsWill stronger US growth create foundations for a bigger USD rebound?
The desk posits that the recent positive surprises in US economic data are laying the groundwork for a more substantial rebound in the USD. Per the full note from MUFG EMEA, the divergence between weak employment growth and robust GDP figures suggests that the USD could strengthen further if this trend persists. The latest GDP growth was reported at an annualized rate of 4.9% for Q3, which contrasts sharply with the sluggish employment growth figures, indicating a potential disconnect in the economic recovery narrative. This backdrop sets the stage for a possible USD rally, especially as traders digest these mixed signals.
Risk-Off Flashpoint (Now in Focus) Podcast Version
The desk anticipates a risk-off sentiment to dominate the FX landscape as labor market dynamics come into sharper focus, particularly ahead of the upcoming Non-Farm Payroll (NFP) report. Per the full note from MUFG EMEA, George Goncalves highlights the significance of labor market trends and demographics, which are likely to influence market expectations regarding Federal Reserve policy. With the NFP number expected to provide critical insights into economic health, traders should prepare for potential volatility in US fixed income and currency markets. This backdrop sets the stage for a nuanced trading environment leading up to the March Fed meeting.
USD Sell-off Intensifies Despite Strong US Jobs Data
The desk interprets the recent USD sell-off as a reaction to stronger-than-expected US jobs data, which typically supports the dollar, yet is overshadowed by easing trade tensions and a potential shift in monetary policy. Per the full note from MUFG EMEA, this paradox highlights the market's sensitivity to broader geopolitical factors and central bank signals. The upcoming FOMC and BoE meetings are likely to further influence market sentiment, particularly regarding USD and GBP dynamics. This complex interplay suggests a cautious outlook for the dollar in the near term, despite solid domestic employment figures.
Why has the USD strengthened even as the Fed is set to cut rates again next week?
The desk posits that the recent strength of the USD, despite an anticipated rate cut by the Federal Reserve, can be attributed to broader market dynamics and geopolitical factors. Per the full note from MUFG EMEA, analysts Lee Hardman and Simon Mayes highlight that the USD's resilience is partly due to positioning shifts and the market's reaction to external economic policies, particularly from China. This comes amid a backdrop where the Fed's dovish stance is expected to be countered by a stronger demand for USD as a safe haven. The desk believes that the USD's current strength may persist until clearer signals emerge from both the Fed and global economic indicators.
More from MUFG EMEA
5 items- MUFG EMEAMay 22, 2026
How have the latest macro data & political developments impacted the outlook for the GBP?
- MUFG EMEAMay 15, 2026
US dollar rebounds – yield’s renewed influence on FX
- MUFG EMEAMay 8, 2026
How are Middle East risks & intervention contributing to a weaker USD?
- MUFG EMEAMay 1, 2026
Can USD/JPY Extend Its Decline After BoJ Intervention?
- MUFG EMEAApr 24, 2026
How is the energy price shock impacting FX market performance and major central bank policies?