The change in US non-farm payrolls was disappointingly low. However, the data for the previous months was revised upwards and the unemployment rate eased more notably than had been expected. As there was something for everybody in the data USD exchange rates initially reacted strongly in both directions.
In the end the dollar recorded hardly any net gains or losses against the other G10 currencies as the labour market report was not suited to providing any clarity as regards the timing of the lift off (i.e. the first Fed rate hike).
"All the hype about the lift-off timing seems excessive at this stage. In the end the rule with which the Fed controls interest rates medium to long term will be decisive for the greenback. The lift-off timing will provide us with some information about the Fed's approach, but not only the timing", says Commerzbank.
In particular as the concerns about China/EM will make it more difficult to work out the approach as would normally be the case. In other words, if the Fed does not hike interest rates next week is that due to the concerns about China/EM or because it has a bias towards low interest rates?
And if it does hike does that mean it is hawkish or does it view the China/EM risks to be low? The FOMC meeting next week is getting gradually less interesting, but admittedly the market is likely to have a different view.


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