Soft NFP to take some of the wind out of the USD's sails – TDS
|Payroll employment printed another subdued increase of 559K in May, disappointing consensus but up from 278K in April. This month's relative disappointment is likely to put an end to the USD's latest burst of strength, in the view of economists at TD Securities.
The headline NFP reading came in meaningfully below consensus
“Payrolls rose 559K, a strong number by pre-COVID standards, but below consensus. They remain down 7.6mn from the pre-COVID level. Unemployment fell to 5.8% from 6.1%. Average hourly earnings rose a solid 0.5% MoM; the YoY pace rose to a still-low 2.0% from 0.4%, although that calculation is likely being held down now by compositional effects.”
“The data will likely reinforce the view of most Fed officials that progress has not been ‘substantial’ enough for them to start signaling tapering. That does not preclude them from starting to talk about discussing a progress-dependent plan for tapering as soon as at this month's FOMC meeting, however. Indeed, they have been signaling that such a conversation is about to start.”
“The USD is likely to unwind a good portion — if not all — of its recent gains against the G10 complex. The official report has its bright spots, but we think the FX market will struggle to overlook the headline shortfall.”
“We note that EUR/USD has pushed back above the 1.2133 threshold. A weekly close above that mark should help cement expectations of a return to familiar territory until fresh catalysts emerge. On that front, we think investor attention will soon pivot to next week's ECB meeting as the next major item on the market's agenda.”
“We think this particular mix of ‘very good but not great’ should be constructive for risk appetite in general. Higher beta and risk-sensitive currencies may begin to outperform. Here, we think the AUD and NZD stand out as candidates for renewed gains. The CAD, in contrast, may lag somewhat after Canada registered its own weak employment report for May.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.