NFP Quick Analysis: Buy the dollar dip? Healthy jobs growth to keep Fed on tapering track


  • The US gained 850,000 jobs in June, better than expected.
  • Upbeat figures seem to be in Goldilocks territory, allowing the dollar to fall.
  • The dollar has room to rise once the dust settles, as the Fed remains on course. 

Is the lack of a presidential press conference a sign of strong jobs numbers? In the past two Nonfarm Payrolls reports, the White House pre-scheduled public appearance by President Joe Biden. Both figures missed. This time, the NFP beat estimates with 850K in June

A third consecutive Nonfarm Payrolls disappointment was avoided – but the beat was not huge, revisions were minimal and a downside dollar correction was overdue. That explains the knee-jerk reaction of selling the dollar. It is also essential to remember that these greenback gains were fueled by the Federal Reserve, which based its policy on a better labor outlook, not an outcome.

Time to make big changes? Not so fast. Returning to normal is not like clicking the Undo button – finding workers with adequate skills and with matching salary expectations is far from easy. Nevertheless, the figures still point to rapid growth and that should encourage markets and the Fed.

Officials at the world's most powerful central bank will be responding to the NFP in the coming days and are unlikely to alter their views. The already growing chorus of officials calling for printing fewer dollars will likely continue voicing these views. Market participants are circling late August's Jackson Hole Symposium as the timing of a tapering announcement. 

Moreover, wage growth remains upbeat at 3.6% YoY, and when people have more money in their pockets, it will likely exit these pockets and push prices higher. The Fed's second mandate is price stability and any such increase in salaries may convince the bank to abandon its theory that inflation is transitory. Higher pay means persistent price rises. 

 

 

 

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. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Feed news

How do emotions affect trade?
Follow up our daily analysts guidance

Subscribe Today!    

Latest Forex Analysis


Latest Forex Analysis

Editors’ Picks

EUR/USD tumbles below 1.17 as Fed sets clear taper timeline

EUR/USD has reversed course, plunging under 1.17 after the Fed signaled tapering of bond buys as soon as November, and the conclusion of the process in mid-2022. The hawkish surprise means a rate hike could come sooner. 

EUR/USD News

GBP/USD pares gains on Fed's hawkish shift

GBP/USD is trading under 1.3650, falling as the Fed signaled tapering could begin shortly and end in mid-2022. The prospects of US rate hike are boosting the dollar across the board. 

GBP/USD News

Gold: Fed's hawkish tone marred by risk-on sentiment

Fed leaves interest rates unchanged says moderation in asset purchases "may soon be warranted". Gold volatile on the FOMC statement and rallies into daily resistance. Risk-on tone persists surrounding Evergrande contagion prospects abating. 

Gold News

XRP price bound for another dip before 40% rebound

Ripple price came down 20% since the beginning of this week. With some upside today, bulls stand to face a bull trap that could get quite painful. A better entry point at $0.78 looks to be more promising for bulls.

Read more

Powell Quick Analysis: Three hawkish points propel dollar, NFP critical to cement tapering

Powell surprised by signaling taper announcement could come in November. Tapering may end by mid-2022, opening the door to earlier rate hikes. Powell's comment on employment goal "all but met" is a significant hawkish shift. 

Read more

Majors

Cryptocurrencies

Signatures