US Dollar Volatility Ahead of July NFP Report
US Dollar markets are bracing for the July Nonfarm Payrolls (NFP) report, due on Friday. Market expectations currently stand at around 80,000 new jobs.
Breakeven rates, which indicate the minimum number of jobs required to keep unemployment steady, are seen near 50,000 per month. This lower threshold is a result of slower labor force growth following the pandemic.
BNY strategists John Velis and David Tam point out that inflation remains sticky, yet it's being influenced by supply shocks, AI-related capital expenditures, and constrained labor supply.
The trio of factors makes it difficult for markets to price US rates accurately. The July NFP report will be followed by two more Consumer Price Index (CPI) releases, and the market is still learning about the Federal Reserve's new policy under Chairman Warsh.