A Resilient USD Despite Weak NFP: How To Trade It?
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The resilience of the USD to the weak payrolls report underscores in our view that with limited room for US front-end rates to fall, the USD’s overvaluation gap has now mostly been closed versus the G10 funding currencies (EURUSD and USDJPY already traded through our midyear targets of 1.16 and 108 respectively).
That said, we also don’t see a convincing argument to be bullish on USD against the EUR and JPY given the softer tone of the data and a more uncertain risk environment which should favour current account surplus currencies.
Instead, we would focus on ongoing USD gains against the commodity bloc. The next significant US data release is not due until Friday’s April retail sales.
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