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1 Aug 2014
NFP miss an opportunity to add USD longs? - RBS
FXStreet (Bali) - According to RBS FX Team, even a downside miss on the US NFP on Friday may be seen as an opportunity to add to USD longs or provide better levels to reduce USD-based carry positions.
Key Quotes
"The FOMC acknowledged yesterday that both inflation and employment are moving toward levels consistent with their mandate. Tomorrow, both of the measures most closely associated with the Fed’s dual mandate will be released simultaneously. The July Non-Farm Payrolls are released, including the unemployment rate and wage growth, along with the release of the Fed’s preferred inflation measure, the PCE deflator."
"Simply because of the recent strength in the USD and US indicators, including US GDP, the employment cost index, and initial jobless claims, even an "on-consensus" result may be seen as a modest disappointment. To be sure, a miss on the employment front could arrest some of the recent USD bullishness."
"Still, with the FOMC's message formally beginning the process of making a long-awaited turn toward data-dependence, even a downside miss on payrolls may be seen as an opportunity to add to USD longs (or provide better levels to reduce USD-based carry positions) rather than as a sign that employment is taking a turn for the worse. More broadly, there is also evidence that we're out of the 'sweet spot' for risk on stronger data and this is USD supportive. Please see our USD Playbook for scenarios and trades through tomorrow’s employment release."
Key Quotes
"The FOMC acknowledged yesterday that both inflation and employment are moving toward levels consistent with their mandate. Tomorrow, both of the measures most closely associated with the Fed’s dual mandate will be released simultaneously. The July Non-Farm Payrolls are released, including the unemployment rate and wage growth, along with the release of the Fed’s preferred inflation measure, the PCE deflator."
"Simply because of the recent strength in the USD and US indicators, including US GDP, the employment cost index, and initial jobless claims, even an "on-consensus" result may be seen as a modest disappointment. To be sure, a miss on the employment front could arrest some of the recent USD bullishness."
"Still, with the FOMC's message formally beginning the process of making a long-awaited turn toward data-dependence, even a downside miss on payrolls may be seen as an opportunity to add to USD longs (or provide better levels to reduce USD-based carry positions) rather than as a sign that employment is taking a turn for the worse. More broadly, there is also evidence that we're out of the 'sweet spot' for risk on stronger data and this is USD supportive. Please see our USD Playbook for scenarios and trades through tomorrow’s employment release."