USD and 2-year Treasury yields rebounded yesterday despite confirmation of a sharp slowdown in US labor demand. The Bureau of Labor Statistics (BLS) preliminary benchmark revisions to net payroll growth was larger than expected. Monthly job creation was reduced by an average of -76k a month or -911k annually (consensus: -700k) for the twelve months ended March 2025. The revision represents a decline of-0.6% of total nonfarm employment, which is bigger than the 10-year absolute average annual benchmark revisions of 0.2%, BBH FX analysts report.
Payroll benchmark cut deepens dovish Fed outlook
“The counter-intuitive moves in USD and Treasury yields look more like positioning squaring rather than justified by fundamentals. In our view, the steeper pullback in US labor demand supports a more dovish Fed policy stance, even as inflation risks remain skewed to the upside, given that monetary policy is moderately restrictive. Bottom line: we recommend investors lean against relief rallies in USD.”
“A US District Court judge gave Fed Governor Lisa Cook the green light to attend the upcoming September 16-17 FOMC meeting. According to the ruling, Cook’s alleged mortgage misconduct likely didn’t amount to “cause” to fire her under the Federal Reserve Act. The US Supreme Court, with a conservative majority shaped by President Donald Trump’s appointment, will ultimately have the final say. Regardless of the final ruling, political interference with the Fed’s independence undermines policy credibility and is an ongoing drag on USD.”
“The Senate Banking Committee votes today on Stephen Miran’s nomination to the Federal Reserve Board of Governors. If he clears the panel, the nomination will proceed to a full Senate vote on September 15, allowing him to take part in the September FOMC meeting. Miran has expressed support for significantly lowering interest rates. Crude oil prices ticked-up by less than $1/bbl following Israel’s strike in Doha targeting Hamas’ leadership. We doubt this targeted attack will curtail the downtrend in crude oil prices given the global oil glut. The US Energy Information Administration expects global oil inventories to grow by an average of more than 2 million barrels per day from 3Q25 through 1Q26 as OPEC+ members increase production.”