NFP Preview: Good report to end dollar weakness

Nonfarm Payrolls are forecast to drop by two-thirds to 1.6 million while the unemployment rate is set to drop to 10.5% from 11.1%. Dollar could reverse its decline on a right payrolls report, Joseph Trevisani, an analyst at FXStreet, reports.

Key quotes

“Nonfarm Payrolls are forecast to rise 1.6 million in July down from 4.8 million in June and 2.699 million in May. The unemployment rate is expected to drop to 10.5% from 11.1% and the labor force participation rate to fall to 61.1% from 61.5%. Average hourly earnings should decrease by 0.5% on the month in July and rise 4.2% annually following the 1.2% drop and 5% gain in June. Average weekly hours may slip 0.1 to 34.4 in July.”

“Currency markets have punished the US dollar over the last three weeks expecting that the second wave of Covid cases would extract a large economic cost in the US. Traders have kept their heads down this week waiting for the Friday payroll numbers. Regardless of the state of jobless claims, if payrolls are good the dollar will rebound.”