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Full broadside against the USD - Commerzbank

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Full broadside against the USD - Commerzbank

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update 2025.08.04 20:28
Full broadside against the USD - Commerzbank

update 2025.08.04 20:28

For all those who thought it wouldn't turn out so badly and had recently traded the dollar stronger for it, Friday brought a rude awakening: The latest US jobs report showed that employment growth has dramatically slowed down. It wasn't the July figure, which at 73k was still just within the range of expectations captured by analysts surveyed by Bloomberg, that was shocking, but rather the revisions of the previous two months that knocked everyone off their chairs. Roughly 260k fewer jobs were created in May and June than originally reported. Employment growth was thus as weak as during the pandemic. As the 'cherry on top', there was also a rising unemployment rate, which almost caused another negative surprise. The interest rate cut in September, which had been priced out after the Fed meeting, is now back on the table. Consequently, all gains of the US dollar against the euro since the Fed meeting evaporated in one go, Commerzbank's Head of FX and Commodity Research Thu Lan Nguyen notes.

BLS reports from now on are likely to be viewed with skepticism

"But US President Trump wouldn't be who he is if he didn't add more fuel to the fire: He abruptly fired the head of the Bureau of Labor Statistics (BLS), the office responsible for labor market statistics. The 'TACO' ('Trump always chickens out') narrative, and thus another USD-supporting argument, collapses with this step. For those who thought that Trump might reconsider his tariff strategy once the negative impacts on the US economy became visible, are now being proven wrong. Instead of facing reality, the US president apparently prefers sweeping the problem under the rug, i.e. 'What the investor doesn't know won't hurt him'."

"However, Trump is likely to achieve the exact opposite. After all, he made no secret of why he fired the head of the BLS. Any successor to her position must now fear a similar fate if they don't deliver better data. Any statistics that the BLS reports from now on, especially if they paint a positive picture of the US economy, are likely to be viewed with great skepticism. Weak data, on the other hand, will be taken all the more seriously. As a result, the US dollar is likely to react asymmetrically to BLS data in the future, gaining little on good data and coming under greater pressure on weak data."

"But as if all these weren't bad enough news for the US currency, Fed Governor Adriana Kugler announced on Friday her premature resignation from the Fed board. Her term was set to end in January. Kugler's departure is highly likely to pave the way for the new future Fed Chair, unless he or she is chosen from the current members of the FOMC. In any case, who Trump will nominate as Kugler's successor will serve as an important indication of how strongly the president intends to influence the Federal Reserve. I would not bet on anything positive for the dollar coming from this either."


Date

Created

 : 2025.08.04

Update

Last updated

 : 2025.08.04

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