FX Update: USD boost fizzling after payrolls blowout. FX Update: USD boost fizzling after payrolls blowout. FX Update: USD boost fizzling after payrolls blowout.

FX Update: USD boost fizzling after payrolls blowout.

Forex 4 minutes to read
John Hardy

Head of FX Strategy

Summary:  The US dollar tried to rally on the back of the shocking payrolls data surge in the January US jobs report, as faster and more Fed rate hikes were priced into the coming twelve months and beyond as US long yields also surged to a new cycle high. But the move is aging poorly, suggesting that yield spread widening will not generally support the US dollar from here, leaving only misery or risk aversion as the last potential support for the greenback now.

FX Trading Focus: US jobs data shocks expectations, USD reaction telling, Riksbank focus this week

US jobs report a positive shocker. The market “lean” going into the US January jobs report on Friday was for a weak payrolls print, given the known impact of the omicron variant of covid on activity in some areas of the country and after an ugly -300k print in the ADP private payrolls number last Wednesday. Instead, we got a +467k print for January and a massive +700k revision to the November and December payrolls numbers. These large upward revisions will offer support for the idea that the participation rate is normalizing a bit more quickly again after extraordinary pandemic benefits expired in September. That is: at least for that portion of the labor market that was held away from work due to generous benefits. Indeed, the participation rate rose +0.3% as the labor force expanded, a positive driver of the unemployment rate ticking up to 4.0%. The average hourly earnings were a mixed read: hot +0.7% month-on-month growth and +5.7% year-on-year readings, but flattered to a degree by weekly hours worked (the denominator) dropping 0.2 hours – that is unlikely to repeat. Still, it is an inflationary report, all in all, and US yields jumped higher all along the US yield curve, with the market now pricing in over 30 basis points of tightening now at the March FOMC meeting and the 10-year yield pulling to a new cycle high. The curious thing was the lack of a more sustained US dollar reaction – a rather feeble performance suggesting that the US dollar may find it difficult to appreciate from here on yield spread widening as the Fed is priced to do more, and quicker. That possibly leaves misery and weak risk sentiment as the only potential support for the greenback now.

Riksbank – as argued below, Sweden has note escaped the hot inflation numbers in evidence virtually everywhere else and the SEK could be in for a major boost if the Riksbank affirms what the market is already positioning for: that it will have its own capitulation moment on the need to tighten policy. SEK has likely been held back lately by its correlation with risk sentiment, otherwise it would likely have traded far stronger: can the Riksbank overwhelm this source of SEK softness with a solidly hawkish meeting on Thursday?

An interesting SEK pair to watch this week in addition to EURSEK. Swedish short rates have tracked short EU rates higher with close correlation, but the sharp recovery in the euro post ECB also saw the EURSEK pair bid back into the higher range. Observers are split on whether the Riksbank is set to keep its QE purchase target unchanged and/or bring forward the anticipated time frame of rate lift-off (currently not until Q4 2024!). Arguably, doing so now would be front-running the ECB, which plans to review its inflation policy in March, but surely the Riksbank needs to buy some credibility on the inflation front as well after their core inflation rate hit its highest level since the 1990’s, and can feel far more comfortable in doing so with EURSEK near 10.50 rather than sub-10.00? Pure EURSEK trades are one way to express SEK strength, but USDSEK is potentially another one after the nice symmetric reversal pattern. This pair could head back toward 8.75 in a hurry if the Riksbank also capitulates on the need to tighten policy.

Source: Saxo Group

Table: FX Board of G10 and CNH trend evolution and strength.
The Euro strength sticks out loud and clear here, though it looks a bit exaggerated if we need to see additional actual spread widening in anticipated policy rates to driver higher levels still from here. Note the Scandies (SEK and NOK) picking up a bit of the EUR bid.

Source: Bloomberg and Saxo Group

Table: FX Board of G10 and CNH trend evolution and strength.
The Euro strength sticks out loud and clear here, though it looks a bit exaggerated if we need to see additional actual spread widening in anticipated policy rates to driver higher levels still from here. Note the Scandies (SEK and NOK) picking up a bit of the EUR bid.

Source: Bloomberg and Saxo Group

Upcoming Economic Calendar Highlights (all times GMT)

  • 1545 – ECB President Lagarde to speak
  • 2000 – US Dec. Consumer Credit
  • 2350 – Japan Dec. Current Account Balance
  • 0030 – Australia Jan. NAB Business Survey
  • 0215 – New Zealand RBNZ Governor Orr to speak on future of money


The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)
Full disclaimer (https://www.home.saxo/legal/saxoselect-disclaimer/disclaimer)

Saxo Bank (Schweiz) AG
The Circle 38

Contact Saxo

Select region


All trading carries risk. Losses can exceed deposits on margin products. You should consider whether you understand how our products work and whether you can afford to take the high risk of losing your money. To help you understand the risks involved we have put together a general Risk Warning series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. The KIDs can be accessed within the trading platform. Please note that the full prospectus can be obtained free of charge from Saxo Bank (Switzerland) ltd. or the issuer.

This website can be accessed worldwide however the information on the website is related to Saxo Bank (Switzerland) Ltd. All clients will directly engage with Saxo Bank (Switzerland) Ltd. and all client agreements will be entered into with Saxo Bank (Switzerland) Ltd. and thus governed by Swiss Law.

The content of this website represents marketing material and has not been notified or submitted to any supervisory authority.

If you contact Saxo Bank (Switzerland) Ltd. or visit this website, you acknowledge and agree that any data that you transmit to Saxo Bank (Switzerland) Ltd., either through this website, by telephone or by any other means of communication (e.g. e-mail), may be collected or recorded and transferred to other Saxo Bank Group companies or third parties in Switzerland or abroad and may be stored or otherwise processed by them or Saxo Bank (Switzerland) Ltd. You release Saxo Bank (Switzerland) Ltd. from its obligations under Swiss banking and securities dealer secrecies and, to the extent permitted by law, data protection laws as well as other laws and obligations to protect privacy. Saxo Bank (Switzerland) Ltd. has implemented appropriate technical and organizational measures to protect data from unauthorized processing and disclosure and applies appropriate safeguards to guarantee adequate protection of such data.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc.