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2 Apr 2015
US NFP results: USD sees significant risks – Scotiabank
FXStreet (Barcelona) - Previewing the possible NFP outcomes and the probable position squaring & trades in the USD, Camilla Sutton CFA, CMT, Chief FX Strategist at Scotiabank, notes that USD might range-trade in the near term and resume its uptrend later in the year.
Key Quotes
“Nonfarm payrolls are expected to show March job gains of 245k, a stable unemployment rate at 5.5% and average hourly earnings up 0.2%m/m. The whisper number is likely slightly lower.”
“Risk of an upward surprise: Considering the disappointing ADP release (189k) and a slowing in ISM manufacturing employment, an upside surprise (above 250k) would be USD positive.
The Fed’s criteria to lift off includes stabilization in core inflation (which we have seen from both CPI and PCE readings) and improvement in labour; accordingly a strong employment release would pull forward the risk of an earlier Fed interest rate hike.”
“Risk of a sub‐200 print is low: Officially, there are only 2 of 88 estimates on Bloomberg calling for a sub‐200k print, which highlights how much of a surprise such a release would be.
In addition, in the last year nonfarm releases have ranged between 213k and 423k and there has not been a sub‐200 print recorded in two years (assuming you ignore the August 2014 print that was subsequently revised higher).
Should a sub‐200 print occur it would be considered a significant disappointment and risks pushing out the expectations for Fed interest rate hikes and would put significant downward pressure on the USD.”
“The release of nonfarm payrolls is complicated to predict; however the release itself is an important input into Fed policy and accordingly the USD.”
“Our base case is that the USD will trade within a range in the near‐term but resume its upward trend later in the year, but at a more moderated pace than Q1”
Key Quotes
“Nonfarm payrolls are expected to show March job gains of 245k, a stable unemployment rate at 5.5% and average hourly earnings up 0.2%m/m. The whisper number is likely slightly lower.”
“Risk of an upward surprise: Considering the disappointing ADP release (189k) and a slowing in ISM manufacturing employment, an upside surprise (above 250k) would be USD positive.
The Fed’s criteria to lift off includes stabilization in core inflation (which we have seen from both CPI and PCE readings) and improvement in labour; accordingly a strong employment release would pull forward the risk of an earlier Fed interest rate hike.”
“Risk of a sub‐200 print is low: Officially, there are only 2 of 88 estimates on Bloomberg calling for a sub‐200k print, which highlights how much of a surprise such a release would be.
In addition, in the last year nonfarm releases have ranged between 213k and 423k and there has not been a sub‐200 print recorded in two years (assuming you ignore the August 2014 print that was subsequently revised higher).
Should a sub‐200 print occur it would be considered a significant disappointment and risks pushing out the expectations for Fed interest rate hikes and would put significant downward pressure on the USD.”
“The release of nonfarm payrolls is complicated to predict; however the release itself is an important input into Fed policy and accordingly the USD.”
“Our base case is that the USD will trade within a range in the near‐term but resume its upward trend later in the year, but at a more moderated pace than Q1”