ING strategist Francesco Pesole notes that recent Dollar weakness has been driven more by sentiment than data, but highlights that today’s US payrolls are pivotal. Pesole forecasts 80k payrolls and 4.4% unemployment, seeing scope for DXY to correct higher, while still arguing conditions for a broad, sustainable USD recovery remain absent.

Key US jobs data to guide DXY

"Today’s jobs report is a pivotal event for the FX market. A materially weak print would likely pave the way for markets to price in a cut in April, and for DXY to test 96.0 in the coming days. Our call is 80k payrolls, more upbeat than consensus (65k) and market expectations: the Bloomberg whisper number has dropped from 50k to 37k since Kevin Hassett’s comments on Monday."

"We don’t expect major downside surprises on 2025 payroll revisions (consensus -825k) or upward surprises in unemployment, which we see stable at 4.4%."

"If we are right with our call, we should see some of the recent macro negativity leave the dollar. However, conditions for a broad-based sustainable USD recovery don’t appear to be in place, and we think an upward correction in DXY wouldn’t have long legs."

"The latest dollar selloff was not initiated primarily by US data weakness, but the calendar this week has all but endorsed the sourer mood on the greenback."

"Yesterday, retail sales (for December) were flat on the month versus expectations of a 0.4% gain, meaning real sales volumes fell."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)