It’s All About The Jobs For USD

We have the first Friday of July coming up this week, which of course means it’s time for another NFP print. Markets will be watching this incoming print like a hawk after the June FOMC meeting.

At the last meeting, we saw enough FOMC members have a change of heart about the economic outlook. Just take a look at the Fed’s dot plots – it reflects that 13 members now favour an initial interest rate hike in 2023 (up from seven members in March).

But that wasn’t enough for us to change our medium-term neutral outlook for the Dollar, as the Fed still stuck to their transitory inflation guns. Plus – there’s still a lot of “substantial progress” required in the labour market before they will look to actually start tapering asset purchases.

However, that does mean that the Dollar will be very sensitive to incoming data, especially labour market numbers. Remember – the market will use that as a gauge for the Fed’s policy normalization path.

We explore this theme in detail in this week’s video.