Economists expect the headline figure to show the US economy added 200,000 jobs in the month of March after adding 275,000 in February. If the real figure is substantially above this – by a margin of more than 10%, say – it is likely to pressure the DXY higher.
Positive employment growth in the US, which already has a relatively tight labor market, will suggest upward pressure on wages and higher inflation. Higher inflation means the US Federal Reserve (Fed) will have to keep its main interest rate, the Fed Funds Rate, at its current relatively high (5.5%) level for longer. Higher interest rates are positive for the US Dollar since they attract greater inflows of foreign capital.
Another important metric within the NFP report is Average Hourly Wages, since this more directly impacts inflation expectations. If this metric rises more than forecast it will push up DXY and the opposite if it falls. In the last report wages rose 4.3% YoY and expectations are for a drop to 4.1%.
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