ING economists predict headline payrolls in June to be in the range of 550-600K, which is lower below market expectations. The USD may give up some gains in favor of high-beta currencies such as the NOK, CAD, AUD, and NZD.” The headline Nonfarm Payrolls (NFP) figure is expected to be in the 550-600K area, according to our US economist. While undoubtedly a good read, the market is expecting a higher headline figure (approximately 710K): if our projections are correct, the data miss should persuade the market to a) believe the Fed’s hawkishness has peaked for the time being, and b) settle for a ‘quiet’/low-volatility summer.”
“If our economist’s forecasts for a positive but below-consensus NFP reading come true, we expect the dollar’s price action to be generally negative, as some of the Fed’s hawkish expectations are scaled down while the economic story remains intact. Any dollar decline, on the other hand, should be more pronounced against currencies that potentially profit from a repeat of the strong equities (risk sentiment) reaction witnessed in the past.”
“Those with hawkish central banks, including as the NOK, CAD, and NZD, may also profit from forecasts of a low-volatility FX market in the coming weeks, which might provide some fertile ground for carry trades. However, against currencies with a more appealing funding profile, such as the JPY, CHF, and the euro, such an influence may be more obvious.”/n
