Friday’s US NFP data served to muddy the Fed policy outlook rather than resolve it conclusively, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

USD broadly higher after NFP report

“The data showed slightly lower than forecast job growth and the expected drop in the unemployment rate but also reflected significant downward revisions to the prior two months’ payroll data. The downward revision was the initial focus for markets, driving the USD lower before it quickly steadied. A little later, headlines covering comments from Fed Governor Waller highlighted him favouring ‘front-loading’ rate cuts, pushing the USD down again.”

A broader read of the remarks showed that Waller, in fact, suggested ‘careful’ rate cuts starting in September. Equivocal data plus the Waller comments prompted markets pare back Fed September easing expectations somewhat whilst extending total easing bets through year end fractionally. The USD is trading generally firmer today as markets pare back some of the additional year-end easing swaps had priced in.”