FX Daily: High-stakes payrolls
The desk anticipates a potentially muted dollar reaction to today's non-farm payrolls, given the close proximity of consensus and analyst targets around employment numbers. Per the full note from ing-think, the desk's estimate of 70,000 new jobs is slightly below the consensus of 80,000, with expectations for unemployment to rise to 4.3%. This highlights the sensitivity of market participants to not only data outcomes but also the ambiguous messaging from Fed Chair Kevin Warsh, which opens the door for varied interpretations on future Fed policy decisions. With no cuts anticipated and a modest dollar softness expected, the upcoming CPI report may be pivotal for causing a significant shift in sentiment toward the dollar in the near term.
What the desk is arguing
The desk frames today’s non-farm payrolls release as a crucial determinant for near-term dollar strength or weakness. With the consensus figure at 80,000 and the desk's call at 70,000, any significant deviation could lead to marked volatility, particularly in USD pairs like EUR/USD and USD/JPY, reflecting market readjustments to Fed expectations.
Additionally, unemployment is expected to slightly tick up to 4.3%, bolstered by a higher participation rate. This marginal rise could cause a softening in dollar valuations, but the reaction may not drastically shift perspectives regarding a potential September rate hike from the FOMC, indicating a stabilization in market rates around 14-17bp since the last FOMC meeting.
Where it sits in our coverage
Our current spot target for EUR/USD stands at 1.1466, with a Dec-26 consensus forecast ranging from 1.1200 to 1.2000, as tracked across various firms. Specific targets include: - Deutsche Bank: 1.2500 - Morgan Stanley: 1.1600 - Rabobank: 1.1400
This outlook aligns with the consensus among firms, as many are forecasting levels within the current range, though notable divergences exist, particularly with UBS projecting a bullish outlook at 1.2000 for Mar-26, indicative of different views on recovery trajectories.
How other firms see it
Firms like Goldman and JPMorgan see a continued trend toward dollar strength, projecting targets aligned with near-term USD stability. Conversely, firms such as BofA are more cautious, with projections suggesting weaker dollar valuations due to external pressures and potential market corrections.
The USD/JPY pair remains pivotal in these considerations, especially as it echoes broader shifts dictated by BoJ policy, particularly as traders digest potential impacts of US employment data on dollar/yield differentials.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Non-farm payrolls data today is critical for near-term USD direction.
- 02Desk estimates 70,000 jobs added, slightly below the consensus of 80,000.
- 03Unemployment expected to rise to 4.3%, indicating softening dollar potential.
- 04Upcoming CPI report could be pivotal in reshaping market expectations for September FOMC.
Market implications
Focus on the dollar as it may react sharply to the non-farm payrolls print, particularly if numbers deviate significantly from expectations. Look for sentiment shifts around the upcoming CPI report as it could define market trajectories heading into the September FOMC.
Risks to this view
A significant surprise in today's payrolls print could prompt a rapid realignment of dollar expectations. Additionally, any unexpected dovish signals from Fed communications following the data may catalyze a stronger dollar response contrary to current market positioning.
EUR/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
Bank of America | Bearish | 1.1200 |
ANZ | Bearish | 1.1400 |
UOB | Bullish | 1.1565 |
Articles FX Daily: High-stakes payrolls Published 07:45 FX Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Kevin Warsh’s ambiguity at the July FOMC means data releases like today’s payrolls carry greater risks of an outsized market reaction. Our call (70k) is close to consensus (80k), with only a tick higher in unemployment to 4.3%, which could drive a small dollar drop. We are still looking at no Fed cuts and dollar softening going forward Frantisek Taborsky , Francesco Pesole and Chris Turner Amid vague Fed communication, markets' attention has firmly shifted to today's non-farm payrolls release We have published our August update of FX views and forecasts: FX Talking: Caught between war and Warsh USD: Unemployment rate can tick higher today Our latest fair value models show that short-term rate differentials have become increasingly the predominant driver of USD moves of late.
Federal Reserve Chair Kevin Warsh’s ambiguous communication incidentally means more flexibility for markets to interpret data under the policy implication lens. That makes today's US jobs report potentially very important in determining whether September hike expectations are reinforced or unwound. Pricing has been remarkably stable at 14-17bp since the July FOMC.
Our macro team’s call is 70k for July’s payrolls today, a tad below the 80k consensus. We expect a modest rise in unemployment to 4.3% on a higher participation rate (consensus is 4.2%). This scenario could result in a slightly softer dollar, but should not drastically change markets’ conviction levels about the September FOMC.
A decisive break in the dollar may have to wait for next week's CPI release. The dollar has regained a bit of ground into today’s release. The main drivers were primarily some souring in risk sentiment and an oil rebound on poor Gulf headlines, but some precautionary dollar buying into today’s data event might also have played a part.
Last week, this dynamic amplified the negative dollar reaction to the FOMC. For now, our call remains one of USD weakness in the next couple of months as we expect the Fed to stay on hold this year. But we see a greater chance that next week’s CPI and the batch of August data will deliver a clearer dovish narrative to the front end and take the dollar more sustainably lower.
USD/JPY should prove to be the most sensitive G10 pair to the payroll release today. Markets are already rebuilding JPY shorts after the coordinated US-Japan intervention, and rising bets on a Bank of Japan September hike are doing little to help the yen. We are targeting a return to 160 in the next few weeks before returning to 158 by the end of the year on the back of our dovish Fed call.
Sources & References
How we cover this story
Related news on this pair
Euro weakens against US Dollar amid Middle East tensions
Risk-off flows into USD safe-haven assets likely to persist if Middle East escalation prevents ECB rate-cut momentum.
Euro: Recovery stalls near 1.1550 resistance against US Dollar – Scotiabank
EUR/USD rejection at 1.1550 suggests sellers remain active; watch for fresh lows if support breaks.