Ahead of today’s US jobs report, the dollar is slightly higher against most G10 and key EM currencies. For the USD to sustain further gains and witness a potential acceleration to the upside, economists at TD Securities believe a considerably larger upside surprise is required.
“We believe today’s reading – particularly on an outlier – could be critical for FX market direction in the coming weeks.”
“On headline NFP, TD is above consensus, but we believe FX markets will ignore this because minor upside risks are already priced in. We believe the USD would need a particularly strong reading to find sustained upside from present levels after a big run higher.”
“A weaker report would inevitably result in a reversal of recent gains, but we believe markets will be more tolerant of a setback.”
“In our basic assumption, the USD is likely to revert to consolidation mode against most G10 rivals, at least until any knee-jerk reaction fades. The US holiday on Monday only adds to these views, as trade activity may fade fast once the report has been digested.”
“All other things being equal, we expect the USD to trade in familiar ranges against its main G10 rivals as the summer doldrums set in ahead of the July FOMC meeting.”/n
