Strong Payrolls May Offer Limited Support for US Dollar
Market participants are awaiting the release of the July US non-farm payrolls (NFP) data, which is expected to show resilient labor demand. According to BBH's Elias Haddad, a stronger report would likely bring forward Federal Reserve hike expectations, but should not significantly impact the roughly 50 basis points of tightening priced in over the next year.
The consensus estimate for NFP gains stands at +80k vs. +57k in June, while Bloomberg's whisper number is around +78k. The unemployment rate is seen unchanged at 4.2% for a second consecutive month, which is lower than the FOMC's 2026 projection of 4.3%.
Haddad notes that an NFP beat would reinforce the resilience of US labor demand and bring forward Fed hike expectations, but should do little to change the roughly 50bps of tightening priced in over the next year. He also points out that US wage growth is consistent with the Fed's 2% inflation target, and Fed policy is already restrictive, assuming a neutral rate of 3.00%.