Scandalous NonFarm Payrolls Could Break the Dollar

The positive driver was not only the interest in Apple, Nvidia, and Tesla, but also a shift in trade relations between the US and Vietnam. The US agreed to impose 20% tariffs on some Vietnamese imports, which unexpectedly boosted optimism.

But only briefly. July 9 is just around the corner, and there are still no “great” trade deals with major partners. Nevertheless, the Nasdaq gained almost 0.8%, and the US dollar strengthened against all major currencies, including the yen.

By the way, the “big beautiful bill” has already passed the Senate and is heading to the House of Representatives. If adopted, the US budget deficit will rise by $4 trillion, and the national debt will reach 125% or even 130% of GDP — the highest since World War II.

If inflation stays persistently high, the Fed will not be able to cut rates aggressively, leaving the White House with a choice: cut spending or admit default.

The ISM Manufacturing PMI remained below the 50-point level — 49.0 in June versus 48.5 a month earlier. This fits with related sector dynamics: a weak housing market, modest consumer spending, and rising unemployment. The import tariffs were intended to protect the domestic market, but in practice, American industry is beginning to suffocate. And it could take several quarters for it to adapt to the new conditions.

If even Ford is forced to stop factories due to a shortage of Chinese magnets, what kind of supply chain stability can we talk about?

What to expect from NFP?

Recall that the previous NFP report showed relative labor market stability. However, revisions of past months’ data spoiled the overall picture — for example, April was revised down by 30,000 jobs. This has become a bad tradition: in 22 of the last 28 months, employment data was revised downward.

• If current employment data is weak, the Fed could cut rates at the next meeting, exactly what Trump wants. What Powell calls a “healthy” unemployment level could soon exceed acceptable limits.

• If unemployment remains low but the workforce shrinks, this would indicate structural weakness. The Fed could not ignore such a signal.

• If NFP comes out strong, significantly above forecasts, expectations for a Fed rate cut in September will decrease, which would be positive for the dollar.

Yesterday Trump aggressively stated that Powell must immediately resign. Most likely, Trump has already seen the NFP data, and the numbers did not please him. Goldman Sachs expects 85,000 new jobs, but that includes 40,000 jobs created by deporting migrants and cuts in Musk’s government contracts.

WARN layoff notices and Challenger reports show increasing pressure, and weak hiring is pushing the labor market into a critical situation.

In this scenario, the dollar will be pressured not only by an imminent Fed rate cut but also by the threat of an economic recession. So we can only watch how political mistakes transform into economic problems.

The reaction to NFP will be mixed due to the simultaneous release of multiple indicators. After NFP, a medium-term trend reversal is possible in EUR and JPY. Note the early close on US exchanges, with tomorrow a holiday on US platforms. Market liquidity during this period will be unstable, but speculation is guaranteed.