NFP: FX markets are likely to observe rather than react – TDS

Expectations for a historically bad payrolls report have been built up. Economists at TD Securities think FX is more likely to observe rather than react to any large extent. 

Key quotes

“Our -25mn forecast for payrolls allows for some undercounting of weakness in the establishment survey data as well, with some firms not responding to the BLS because they have shut down.”

“The payrolls report might trigger more reaction in FX, once it becomes clear how the reopening process in a post-Covid world unfolds. For now, we stick to our bullish USD bias in the coming weeks.”

“EUR/USD has been heavy, but the 1.0770/00 pivot has been thick. We think this will inevitably fail to hold in the coming weeks. Meanwhile, in the USD/JPY pair, the break below 107 is bearish but now that domestic holidays have passed, we could see more volatility in the cross.”