Non-Farm Payrolls: Dollar Outlook Hinges Upon the Degree of Job Losses

Now more than ever, the change in non-farm payrolls for the month of March will determine the outlook for the US dollar and US monetary policy. All but one of our leading indicators for non-farm payrolls point to another month of job losses, which means that a negative print alone will not be enough to drive the US dollar lower. The dollar has been rebounding in the days leading up to the non-farm payrolls report and interest rate expectations for the FOMC meeting at the end of this month are strongly skewed in favor of a 25bp versus 50bp cut. We have seen these expectations change on a dime in reaction to incoming economic data and given the fact that the non-farm payrolls report is the most market moving indicator for the US Dollar is no question that a weak release could alter market expectations significantly.