Citi has provided commentary on the potential impact of the upcoming jobs report on the USD. The report, which is set to be released on Friday, has markets anticipating various outcomes for currency pairs involving the USD, such as USDJPY and USDCHF, based on different scenarios of the Nonfarm Payrolls (NFP) data.
Citi analysts suggest that if the NFP data meets or exceeds consensus expectations, it could lead to a rise in USDJPY and USDCHF. Additionally, higher beta foreign currencies might also see a marginal increase against the USD due to reduced recession risk.
Conversely, if the NFP data slightly misses expectations, USDJPY and USDCHF could decline, but dovish Federal Reserve repricing may offer support to risk assets, allowing higher beta currencies to potentially perform better against the USD.
In the event of a notably weaker NFP, as forecasted by Citi Economics at 70,000 new jobs and a 4.3% unemployment rate, both USDJPY and USDCHF could fall significantly. This scenario might also put pressure on higher beta currencies if increased risk aversion triggers a ‘bad news is bad news’ market reaction.
Citi’s analysis also highlights two important considerations for the upcoming jobs report. Firstly, a stronger-than-expected report could negatively impact EURUSD, particularly if the narrative of a European Central Bank pivot gains traction and the market trends towards selling EUR.
Secondly, the range of possible data outcomes could leave Federal Reserve pricing and the USD in a state of uncertainty. The recent balanced rhetoric from Federal Reserve Chair Jerome Powell and the proximity of another jobs report before the November Federal Open Market Committee meeting may limit market movements unless there is an extreme data deviation.
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