US Dollar: Strong payrolls may offer only limited support – BBH

Brown Brothers Harriman’s (BBH) Elias Haddad expects the July United States (US) non-farm payrolls to show resilient labor demand, with consensus around 80k jobs and unemployment steady at 4.2%. A stronger report would bring forward Fed hike expectations but is not seen changing the roughly 50 bps of tightening priced over the next year, implying any US Dollar (USD) strength should be modest and short-lived.

Payrolls to drive Dollar reaction

"USD and Treasury yields will take their cue today from the July non-farm payrolls (NFP) (1:30pm London, 8:30am New York). Consensus is looking for NFP gains of +80k vs. +57k in June. Bloomberg’s whisper number is around the same at +78k."

"The unemployment rate is seen unchanged at 4.2% for a second consecutive month, a tick below the FOMC 2026 projection (4.3%)."

"An NFP beat would reinforce the resilience of US labor demand and bring forward Fed hike expectations. But it should do little to change the roughly 50bps of tightening priced in over the next year. 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%."

"That suggests any USD boost from a strong payrolls print is likely to be shallow and short-lived. Conversely, an NFP miss would trim Fed rate hike bets and weigh on USD."

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