USD: Annual revisions may be big – ING

The US Dollar’s (USD) bearish momentum has eased into today’s US jobs release. Most of the tariff shock from last weekend has been absorbed, and markets are also probably reconsidering the optimism on a US-China deal. Beijing’s retaliatory tariffs are due to come into effect on Monday, and the chances of a de-escalation before then have decreased. Also helping the dollar were some comments by Treasury Secretary Scott Bessent, who said the strong dollar policy remains in place, ING’s FX analysts Francesco Pesole notes.

A move to 107.0 in DXY is warranted

“The biggest driver for FX should be US payroll figures for January. The consensus is for a slowdown from 256k to 175k, but our estimate is closer to 160k. A lot of focus will be on annual benchmark revisions.”

“Last year's provisional revisions indicated that, upon cross-referencing with tax data, the Bureau of Labor Statistics had overestimated job creation by approximately one-third. This points to significant issues with their model, and we anticipate substantial adjustments to the monthly payroll numbers.”

“So, despite some support potentially coming from souring sentiment on China, we have a negative bias on the dollar today. Markets are pricing in 43bp of easing by year-end and there is room for a dovish repricing on the back of softer economic data. A move to 107.0 in DXY is warranted.”