How does Credit Suisse see this week’s US payrolls number impacting the USD?
1- "We continue to see an asymmetry in favor of the USD going into Friday’s US employment data. The key risk to our broader USD view would be jobs or wages numbers so poor as to entirely rule out a Fed rate hike in 2015," CS advises.
2- "Some combination of payrolls numbers above 200k, an unemployment rate below 5.4% and/or hourly earnings growth back towards 2.3%) would allow the market to again try to price in a September rate hike. If this happens despite depressed global conditions and weak price pressures in most of the rest of the world, the path of least resistance seems clearly higher for the USD," CS argues.
3- "On the other hand, if the data are soft but not enough to take a 2015 Fed rate hike off the table completely, we suspect any USD sell-off would be as unrealistic as last week’s post ECI move," CS projects.
4- "Only data so weak as to push the market to completely give up on the idea of a 2015 rate hike would in our view stand any chance of reversing USD gains while conditions elsewhere are so gloomy (for example, 10-year German bond yields are back around two-month lows). Even in this case, we would expect more defensive currencies like EUR, CHF and JPY to outperform EM and commodity currencies," CS adds.
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