USD: Fed independence risk caps jobs impact – Commerzbank

Commerzbank’s Antje Praefcke argues that January’s delayed US labor market report is unlikely to trigger major moves in the US Dollar, as Nonfarm Payrolls are expected around 70,000 with unemployment steady at 4.4%. Praefcke stresses that markets will focus more on questions over future Federal Reserve policy under Kevin Warsh and concerns about Fed independence, which she sees as the key medium-term risk for the Dollar.

Jobs data seen secondary to Fed risk

"However, I am not so sure that it will lead to any major movements in the US dollar. There are two reasons for this."

"In this respect, a figure of around 70,000 (or even just 60,000) should not cause concern on the market, as the picture of a weakening but not collapsing labor market would remain unchanged. There is therefore no reason to make any major adjustments to interest rate expectations based on the Fed's employment target."

"Important data releases are likely to continue to play a major role in short-term fluctuations in the US dollar. But above all, the question of the Fed's independence is likely to remain the really big issue and the sword of Damocles hanging over the US dollar."

"However, the big question of the Fed's future independence remains the real issue and, at the same time, the biggest risk for the greenback. The answer to this question will not be known until spring."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)