US NFP: Finally, back to the data – Commerzbank

The US Dollar's direction today is likely to be largely determined by the US Non-Farm Payrolls report, which will be released at 1:30 pm BST. The employment report has taken a back seat in terms of its impact on the USD in recent months due to US tariff policy. Nevertheless, it remains a very important, if not the most important, economic indicator for the US, Commerzbank's FX analyst Volkmar Baur notes.

USD can come under renewed pressure

"And today could be an exciting day. After the US labour market added an average of 162,000 jobs per month over the past 12 months, median expectations are slightly lower at 140,000. However, analysts' estimates vary widely. At the lower end, only 80,000 new jobs are expected, while the most optimistic analyst forecasts 200,000 new jobs."

"This is probably also due to the fact that the hard data from the labour market are currently telling a different story than the sentiment indicators. For example, initial jobless claims have remained stable at low levels in recent weeks, while the JOLTS report continues to show low quit rates and high vacancy rates. By contrast, there has been more movement in the surveys of late. Yesterday, the employment component of the services ISM fell 7 points, deep into the sub 50 (46.2) range that signals job cuts, and to its second lowest level since the end of the pandemic."

"So if today's reading is in line with median expectations or even higher, it should provide significant support for the US dollar. Recession fears, which at the moment are mainly based on sentiment indicators, would then ease somewhat. On the other hand, if the reading is at the lower end of expectations or even below, as our economists expect, the US dollar will come under renewed pressure."