ING’s Chris Turner notes that the Dollar sell-off after Kevin Warsh’s Sintra appearance has already been retraced, with markets concluding the new Fed Chair is comfortable letting data drive expectations. With June Nonfarm Payrolls (NFP) seen around 115k–140k and unemployment at 4.3%, Turner expects the Dollar to stay supported, and sees DXY potentially returning to the 101.50/80 area.

Fed rhetoric and NFP guide Dollar

"In consequence, Warsh seems happy to let the data drive market expectations and keep the monetary policy debate in-house for FOMC meetings. On that subject, today sees the June NFP reading. Consensus is around +115k, with a whisper number near +140k."

"We suspect that whatever the number, the dollar can remain relatively supported. Barring a big miss and massive downward revisions to previous months, the Fed's position is that, given the static size of the labour force, even a number close to zero does not need to see the unemployment rate pick up."

"DXY sits close to the middle of a one-week trading range. Another 100k+ NFP today could see a move back to 101.50/80 on the view that the Fed could hike sooner than expected. One wild card to consider is that should the data come in soft, Japanese authorities might use the opportunity to sell a lot of USD/JPY – thus, traders will have to stay agile."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)