Olive branches and Payroll prints, Asia FX cheers, G10 FX waits

Asia’s Wall Street coattail rally was turbo boosted when Beijing’s Commerce Ministry dropped word on its “evaluating” U.S. outreach to kick off trade talks. The fact that Washington stayed mum on a denial suggests this olive-branch ping could be the real deal. G10 FX barely budged—everyone’s in wait-and-see mode ahead of NFP —but Asia’s high-beta currencies lit up in relief rally fashion.

We’re pencilling in 115k ( via the Whisper Number) jobs for April—well shy of the 138k consensus but not nearly weak enough to spook markets or the Fed. The dollar’s recovery streak may take a breather around today’s payrolls report, yet the broader backdrop remains firmly supportive. U.S. equities have ripped back most of the “Sell America” scars, and Treasury yields have settled lower, signalling that the FX confidence crisis is over. Now it’s simply a question of whether incoming data and policy will justify a deeper rotation away from the greenback. With roughly a 2.5% negative risk premium still embedded versus the euro, there’s ample runway for further dollar upside.

Only a payroll print well below 100k is likely to puncture this dollar recovery. Anything between that and the consensus will probably leave FX markets yawning—gradual economic slowdowns are already baked into the dollar’s value. We also expect the unemployment rate to hold at 4.2%, keeping the Fed comfortably in neutral mode ahead of next week’s meeting. DXY has already climbed back above 100.0, and a push toward 101.0 would reclaim half of the post-tariff slide. Given the shift from tariff brinkmanship to tentative deal talks—even with China mulling U.S. outreach—a steady grind higher in the dollar looks fully justified, even if today’s NFP print is a touch softer than forecast.

On the euro side, flash March CPI is set to tick marginally lower to 2.1% headline and edge core inflation up to 2.5%. With country-level prints tracking consensus, there’s little here to sway ECB pricing—policymakers have made it clear they’ll lean on growth data more than minor price moves. The euro’s shine has dimmed this week, and two more soft EUR/USD sessions have only reinforced our view that U.S. normalization bears down on the pair. The 1.13 area remains a key fulcrum; a decisive break below there could open the door to 1.11 in the weeks ahead, while a snap-back above 1.15 looks increasingly unlikely without significant policy surprises.

Meanwhile, USD/JPY is riding the risk-on/risk-off roller coaster—no hawkish BoJ anchor means it climbs on every equity rally and drifts lower only when sentiment sours. Put simply: USD/JPY is your risk-on button—if you’re loading into the S&P 500, lean into USD/JPY; if you’re bracing for a pullback, sell the rip.