US Dollar May Find Greater Catalyst in Jobless Rate vs Payrolls Figure

Talking Points:

• US Dollar to Rise if Unemployment Rate Drop Stokes Wage Inflation Bets
• Aussie Dollar May Fall as Yen Gains if US Jobs Data Fuels Risk Aversion
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All eyes are on the March set of US Employment in the final hours of the trading week. A 248,000 increase in nonfarm payrolls (NFP) is expected. The unemployment rate is seen holding at 5.5 percent, a figure broadly associated with “full employment” (a level such that reducing joblessness further would pressure inflation upward).

Weighing up the possibilities, conflicting cues abound. US economic news-flow has generally underperformed relative to expectations since late December, seemingly warning of disappointment risk. However, the NFP number has been a conspicuous exception, delivering consecutive upside surprises in the double digits since November.

Ultimately, the degree of up/down deviation from forecasts in the net jobs gain figure may prove less significant than the jobless rate reading. A drop below 5.5 percent may drive speculation that building wage-push inflationary pressure will encourage the Federal Reserve to move faster on raising interest rates.

In this scenario, the US Dollar is likely to strengthen against most of its major counterparts. Fears of imminent stimulus withdrawal may likewise fuel risk aversion, boosting the Japanese Yen while weighing on the sentiment-sensitive Australian and New Zealand Dollars.

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--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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