Remarkably, the dollar may be about the lose its record streak of weekly gains despite a strong US payrolls report. While the initial reaction to today’s data was another jump in the greenback, it has since given back that gain, and those from earlier in the week. In our view, that is another indication that the surge in US yields and, consequently, the dollar is nearing exhaustion, at least in the near term. Aside from the robust headline jobs growth number, today’s data paint a more mixed picture: unemployment came in above expectations, and wage growth below. Indeed, with both wage growth and CPI (in m/m terms) running at a pace consistent with the Fed’s 2% target, we think the FOMC will continue to keep rates on hold. In turn, that suggests US interest rate expectations – which continue to discount a roughly 50/50 chance of another hike – will drop back, which would probably weigh on the dollar.
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