USD: Concerns over Fed independence limit reaction to jobs data – Commerzbank

Commerzbank’s Antje Praefcke suggests that the delayed January U.S. jobs report is unlikely to significantly move the Dollar, with Nonfarm Payrolls projected at about 70,000 and the unemployment rate holding at 4.4%. She notes that investors are likely to pay closer attention to the outlook for Federal Reserve policy under Kevin Warsh and to ongoing concerns about the Fed’s independence, which she views as the main medium-term risk facing the Dollar.

Employment report takes a back seat to Fed-related risks

“I’m not convinced this will trigger any significant moves in the US dollar, for two reasons.”

“In that context, a reading of roughly 70,000 – or even 60,000 – should not unsettle markets, as it would still point to a labor market that is softening but not collapsing. As such, there is little justification for making substantial changes to interest rate expectations tied to the Fed’s employment mandate.”

“While key data releases will likely continue to drive short-term swings in the dollar, the overriding issue remains the Fed’s independence, which is effectively the sword of Damocles hanging over the currency.”

“Ultimately, the future independence of the Fed is the central question and the greatest risk for the greenback. Clarity on this matter is unlikely before spring.”

Sources: Fxstreet