Economists at ING expect June’s headline payrolls to come at 550-600K, below market consensus. The USD could give up some gains in favour of the high-beta NOK, CAD, AUD and NZD.
US NFP may pour cold water on the dollar’s momentum
“Our US economist estimates the headline Nonfarm Payrolls (NFP) print to fall within the 550-600K range. While arguably a fairly solid read, consensus is centred for a stronger headline figure (around 710K): should our estimates prove correct, the data miss should provide enough reasons to the market to a) believe the Fed’s hawkishness has reached a peak for now, and b) settle for a ‘quiet’/low-volatility summer.”
“Should our economist’s projections for a positive but below-consensus NFP read prove accurate, we expect the price action in FX to prove broadly negative for the dollar as some of the Fed’s hawkish expectations are scaled back, while the recovery story remains intact. Any dollar weakness should, however, be more pronounced against those currencies that can benefit from a repetition of the positive equity (risk sentiment) reaction seen in previous instances.”
“Among those, NOK, CAD and NZD – which can count on hawkish central banks – may also benefit from expectations of a low-volatility FX market in the coming weeks which offers some breeding ground for carry trades. However, such impact may be more visible against currencies that have a more attractive funding character, such as JPY, CHF and the euro.”
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