Forex
Strong Payrolls May Bring Forward US Rate Hikes, But USD Gains Will Be Short-Lived
US non-farm payrolls for July are expected to show resilient labor demand, according to Brown Brothers Harriman's (BBH) Elias Haddad. Consensus estimates forecast around 80k jobs added in July, with the unemployment rate remaining steady at 4.2%. A strong report could bring forward Federal Reserve hike expectations, but is unlikely to change the roughly 50 basis points of tightening priced over the next year.
Haddad notes that US wage growth is consistent with the Fed's 2% inflation target and that Fed policy is already restrictive, assuming a neutral rate of 3.00%. This suggests that any USD boost from a strong payrolls print would be shallow and short-lived.