Before headlines on a possible replacement for the US Democratic candidate take centre stage again, the focus is on the first piece of hard US data for June: US payrolls. The consensus figure was 190k (the data came out at 206k) after the very strong 272k May print, ING’s analyst Francesco Pesole notes.

Downside risks for the USD are present

“The risks were skewed to a softer reading today after the big drop in the employment component of the ISM services index. To see a major repricing in Federal Reserve rate expectations to the dovish side however, we needed to see payrolls slow below 150k (which didn’t happen) considering the June Fed Dot Plot and rising perceived probability of a Trump win in November work as hawkish counterweights.”

“Over the summer months, we expect to see evidence that the US labour market is at the kind of inflection point that some Fed members like Mary Daly have referred to. We also think that other upside surprises in payrolls may have an asymmetrical, more contained market impact after recent comments by Federal Reserve Chair Jerome Powell suggested the Fed acknowledges that headline figures may overestimate the actual number.”

“We see downside risks for the dollar today, and expect Dollar Index (DXY) to move below 105.0. A substantial repricing in Fed dovish bets may give some respite to the yen, although we continue to see the likes of Norway's krone, and the Australian and New Zealand dollars as the best-positioned G10 currencies for a US-macro led rally in high-beta FX.”