EUR/USD
会员从Dec 21, 2023开始
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May 03 at 07:43
USD: Payrolls may finally start softening
The post-FOMC bias has been markedly bearish on the dollar, and despite the US payrolls risk event today, markets have continued to squeeze USD long positioning yesterday and overnight. The yen remains a major contributor to the soft dollar momentum. Earlier this week, we noted how USD/JPY was showing the same kind of dynamics around and straight after FX intervention in September 2022, when the pair had steadily ground higher in the period after Japan intervened to support the yen. However, the second round of JPY intervention in one week, deployed after a less hawkish than expected FOMC on Wednesday, has sent markets the message that the Ministry of Finance is less tolerant of a post-intervention depreciation of the yen this time. With the help of a rally in short-term USD swaps, USD/JPY is trading just below 153 this morning, around 4.5% below its 160 peak on Monday.
Today’s US payrolls are a huge event for markets, as the details in the jobs report will be a key test to more optimistic bets on Fed rate cuts after Chair Jerome Powell defied the hawkish repricing of the USD curve. Fed funds futures are now again pricing in a rate cut in November, with the September contract showing -20bp and the July one -10bp. The dollar 2-year swap rate is down to 4.80% from 4.95% pre-FOMC, and applying material downside pressure on the dollar.
The consensus for today’s April nonfarm payroll print is 240k, and our call is 210k. The unemployment rate is expected to remain at 3.8%. We note that – despite the continued strength in the latest payroll prints – business surveys still point to a substantial slowing in employment. One of those surveys is the ISM, whose services component is also released this afternoon and expected to come in at 52.0, up from 51.4 in March.
Like in previous jobs releases, the discussion around data quality will be central. The payroll survey has continued to give contrasting indications to the household employment data, which has been much weaker since 4Q23. The household survey is thought to be missing a proper adjustment for rising immigration in the US, essentially underestimating the total workforce and showing inaccurately lower unemployment rates. On the other hand, payrolls may be doing some double counting as the number of Americans holding multiple jobs is at a 30-year high and the birth-death adjustment is generally considered to be pumping up the jobs figures. A convergence of any of those series towards the other would be a crucial development in the coming months.
All in all, our 210k call for payrolls means we do not expect today’s data to dent the bearish dollar momentum as markets may fully price in a cut in September and keep short-term USD rates capped. CFTC data shows net-speculative positioning on the dollar versus reported G10 currencies was at 24% of open interest, the highest since June 2019, so the room for a further long squeeze in the dollar remains substantial should US data soften over the coming weeks.
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The post-FOMC bias has been markedly bearish on the dollar, and despite the US payrolls risk event today, markets have continued to squeeze USD long positioning yesterday and overnight. The yen remains a major contributor to the soft dollar momentum. Earlier this week, we noted how USD/JPY was showing the same kind of dynamics around and straight after FX intervention in September 2022, when the pair had steadily ground higher in the period after Japan intervened to support the yen. However, the second round of JPY intervention in one week, deployed after a less hawkish than expected FOMC on Wednesday, has sent markets the message that the Ministry of Finance is less tolerant of a post-intervention depreciation of the yen this time. With the help of a rally in short-term USD swaps, USD/JPY is trading just below 153 this morning, around 4.5% below its 160 peak on Monday.
Today’s US payrolls are a huge event for markets, as the details in the jobs report will be a key test to more optimistic bets on Fed rate cuts after Chair Jerome Powell defied the hawkish repricing of the USD curve. Fed funds futures are now again pricing in a rate cut in November, with the September contract showing -20bp and the July one -10bp. The dollar 2-year swap rate is down to 4.80% from 4.95% pre-FOMC, and applying material downside pressure on the dollar.
The consensus for today’s April nonfarm payroll print is 240k, and our call is 210k. The unemployment rate is expected to remain at 3.8%. We note that – despite the continued strength in the latest payroll prints – business surveys still point to a substantial slowing in employment. One of those surveys is the ISM, whose services component is also released this afternoon and expected to come in at 52.0, up from 51.4 in March.
Like in previous jobs releases, the discussion around data quality will be central. The payroll survey has continued to give contrasting indications to the household employment data, which has been much weaker since 4Q23. The household survey is thought to be missing a proper adjustment for rising immigration in the US, essentially underestimating the total workforce and showing inaccurately lower unemployment rates. On the other hand, payrolls may be doing some double counting as the number of Americans holding multiple jobs is at a 30-year high and the birth-death adjustment is generally considered to be pumping up the jobs figures. A convergence of any of those series towards the other would be a crucial development in the coming months.
All in all, our 210k call for payrolls means we do not expect today’s data to dent the bearish dollar momentum as markets may fully price in a cut in September and keep short-term USD rates capped. CFTC data shows net-speculative positioning on the dollar versus reported G10 currencies was at 24% of open interest, the highest since June 2019, so the room for a further long squeeze in the dollar remains substantial should US data soften over the coming weeks.
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