US NFP Preview: Softer-than-expected or roughly in-line data to keep soft USD trend in place – Credit Suisse

Economists at Credit Suisse preview the Nonfarm Payrolls release and consider key possible ensuing market scenarios.

Stronger-than-expected NFP readings could trigger renewed USD strength

“Stronger-than-expected NFP readings could drive pushback against the dovish drift in Fed policy expectations, triggering renewed USD strength in the process. The likely mixed liquidity conditions could amplify market moves. However, barring shocking data outcomes, we’d look to stick to our strategy of fading USD strength against EUR and would wait for next week’s US CPI data before making a more comprehensive assessment.” 

“Softer-than-expected or roughly in-line numbers validating the dovish Fed narrative can keep the current soft USD trend in place.” 

“In the unlikely event that the data were to show shockingly weak numbers, featuring a sharply higher unemployment rate and/or an NFP print well below the low end of the Bloomberg analyst forecast range (currently 150K), broader risk-off price action might complicate the FX picture and keep USD weakness more focused in ‘safe haven’ pairs such as USD/JPY and more mixed elsewhere, with USD-EM likely sharply higher. We view this as a tail risk, it is not our baseline scenario.”

See – US Nonfarm Payrolls: Banks Preview, labor market still going strong