US Dollar Weekly Outlook - US NFPs Massive Miss, Heavyweight Data Next Week Will Steer the US Dollar

The latest US Jobs report rocked the financial market Friday, missing expectations by a huge margin, sending the greenback spinning lower against a range of currencies. The market, expecting one million new jobs to be added to the economy – with some commentators calling for a much higher number – fell sharply as new jobs totaled just 266k in April, while Marchs figure was lowered to 770k from a prior 916k.

With the Jobs Report now out of the way, next week‘s economic calendar will be key with three important data releases which will help shape the short-term trend in the greenback. The latest US inflation numbers, the topic du jour, will be closely watched, especially after US Treasury Secretary, and former Fed chair, Janet Yellen suggested earlier this week that ’very modest‘ rate increases could be needed if inflation starts to become a problem. Ms. Yellen backtracked later, say ’it‘s not something I’m predicting or recommending‘, but the soft signal was already in, and spooking, the market. Looking at Friday’s NFP report, rate hikes have been pushed much further back unless inflation runs hot.

US retail sales are expected to pull back sharply from the 9.8% m/m print in March as government stimulus checks and a further re-opening of the economy sent spending sharply higher. Another beat this month – expectations are for a very modest 0.2% m/m increase - would continue to boost the USD and fuel sentiment in the US economy. Last, but not least, Michigan Consumer Sentiment, an index comparing current and future economic conditions, is released late Friday and is expected to continue its recovery from the April 24, 2020 low print of 71.8.

Traders should also be aware of a fresh supply of US Treasury notes and bonds being auctioned off next week which may well cause current UST yields to fluctuate ahead of the sales. On Tuesday, USD58 billion 3-years are on offer, on Wednesday there are USD41 billion 10-years for sale while on Thursday, USD27 billion 30-years hit the street.

The US dollar - post-NFP report – is now touching lows seen in lateFebruary and will need a strong batch of data prints to stem further selling.