Dollar Firm Ahead of Jobs Report

April 01, 2022
  • U.S. rates are on the rise again; March jobs data will be the highlight; ISM manufacturing PMI will be reported after the jobs data
  • Gazprom has sent new payment order to its customers with new payment requirements; eurozone CPI came in much higher than expected; final eurozone March manufacturing PMIs were revised down; ECB tightening expectations have picked up further; Switzerland reported March CPI
  • Japan reported Q1 Tankan survey and final March manufacturing PMI; Michele Bullock was nominated as the Reserve Bank of Australia’s first female Deputy Governor; Caixin reported soft China manufacturing PMI; Korea reported March trade data

The dollar is up as U.S. rates recover. DXY is up for the second straight day after two straight down days and is trading back near 98.50. This month’s cycle high near 99.418 should eventually be tested. The euro has an outside down day yesterday after trading at the highest since March 1 near $1.1185. Higher than expected CPI data continue to boost ECB tightening expectations (see below) but this has lent little support to the single currency as it trades near $1.1050. We still expect an eventual test of this month’s cycle low near $1.08. USD/JPY is moving higher again and is trading near 122.50. We look for further yen weakness but the pace should be slower as it eventually tests the June 2015 high near 125.85. Sterling remains heavy as it continues to trade just above $1.31. We still look for an eventual test of this month’s new cycle low near $1.30 as BOE messaging has tilted more dovish of late. Between the likely return of risk-off impulses and the even more hawkish Fed outlook for tightening, we believe the dollar uptrend remains intact.


U.S. rates are on the rise again. The 2-year yield traded as low as 2.26% yesterday, the lowest since March 25, but is trading near 2.41% today. Similarly, the 10-year yield traded as low as 2.31% yesterday, the lowest since March 24, but is trading near 2.44% today. WIRP suggests 50 bp hikes are about 75% price in for both the May 3-4 and June 14-15 FOMC meetings. After a slight pause, the 2-year differentials with Germany, Japan, and the U.K. are back near multi-year highs and should lead to further weakness in the euro, yen, and sterling vs. the dollar.

March jobs data will be the highlight. Consensus sees 490k vs. 678k in February, while the unemployment rate is expected to fall a tick to 3.7% and average hourly earnings are expected to pick up a few ticks to 5.5% y/y. At this point, the jobs data hardly matter except perhaps that an even faster move towards full employment will simply cement the Fed’s expected rate path. WIRP still suggests around 75% odds of a 50 bp hike at each of the May 3-4 and June 14-15 FOMC meetings. Swaps market sees the Fed Funds rate peaking near 3.0% over the next 12 months. However, we see scope for further upside adjustment here. Evans speaks.

ISM manufacturing PMI will be reported after the jobs data. Headline is expected at 59.0 vs. 58.6 in February. Looking at the components, employment is expected at 53.1 vs. 52.9 in February, prices paid is expected at 80.0 vs. 75.6 in February, and new orders is expected at 58.5 vs. 61.7 in February. ISM services PMI will be reported next week and is expected at 58.6 vs. 56.5 in February. Yesterday, Chicago PMI came in at 62.9 vs. 57.0 expected and 56.3 in February. This represents a nice rebound from the omicron-depressed February but is still slowing sequentially from the mid-2021 peak. February construction spending (1.0% m/m expected) and March auto sales (13.40 mln annual rate expected) will also be reported.


Gazprom has sent new payment order to its customers with new payment requirements. This was to be expected after President Putin yesterday said that Russia would halt all gas contracts if buyers don’t pay in rubles effective today. This would require buyers of Russian natural gas to open accounts at Russian banks. Kremlin officials said that gas supplies won’t be cut off immediately for customers that don’t adhere to the new payment rules, as payments for gas being delivered now aren’t due until late April or early May. We know the EU has secured some commitments from the US and other suppliers to provide more natural gas but we don't think it's enough to offset the potential loss of all Russian supplies. If Putin holds firm, this is yet another headwind for the eurozone economy and another headache for the ECB. No wonder the euro is under pressure again.

Eurozone CPI came in much higher than expected. Headline rose 7.5% y/y vs. 6.7% expected and 5.8% in February, another record high. While higher energy prices are clearly to blame for the headline reading, note that core came in at 3.0% y/y vs. 3.0% expected and 2.7% in February, which is also another record high and suggests inflationary impulses are spreading beyond just energy.

Final eurozone March manufacturing PMIs were revised down. Headline PMI came in at 56.5 vs. 57.0 preliminary. Looking at the country breakdown, Germany came in at 56.9 vs. 57.6 preliminary and France came in at 54.7 vs. 54.8 preliminary. Italy and Spain were reported for the first time. Italy came in at 55.8 vs. 58.3 in February and Spain came in at 54.2 vs. 56.9 in February. Final services and composite PMIs will be reported next Tuesday and are likely to show even bigger drops. Elsewhere, final U.K. March manufacturing PMI came in at 55.2 vs. 55.5 preliminary.

ECB tightening expectations have picked up further. WIRP suggests liftoff is fully priced in for July 21. Looking ahead, swaps market is now pricing in over 100 bp of tightening over the next 12 months, up from 100 bp at the start of this week. Another 65 bp of tightening is priced in over the following 12 months, up from 60 bp at the start of this week. This seems way too aggressive to us, especially in light of recent weakness in the real sector data. Bundesbank President Nagel said after the data that “Monetary policy should not pass up the opportunity for timely countermeasures,” adding “the inflation data speak for themselves.” Of note, the ECB will publish the account of its March meeting next Thursday and will be keenly dissected for clues on future policy.

Switzerland reported March CPI. Headline picked up two ticks as expected to 2.4% y/y, while core picked up a tick to 1.4% y/y, respectively. Last week, the Swiss National Bank delivered a dovish hold. President Jordan said maintaining negative rates is still important for the bank, and that it never waits for another central bank to figure out what to do. He saw low second-round inflation risks, and added that Russia so far poses no risks to Switzerland’s financial sector. There was a sharp upward revision to the 2022 inflation forecast to 2.1%, but the 2023 and 2024 (just added) forecasts of 0.9% suggest liftoff won’t be seen until 2025 at the earliest. Yet the swaps market is pricing in 85 bp of tightening over the next 12 months followed by another 60 bp over the following 12 months, which seems way too aggressive in light of the SNB’s dovish forward guidance.


Japan reported Q1 Tankan survey and final March manufacturing PMI. Large manufacturing index came in at 14 vs. 12 expected and 18 in Q4, while large non-manufacturing index came in at 9 vs. 5 expected and 9 in Q4. Large manufacturing outlook came in at 9 vs. 10 expected and 13 in Q4, while large non-manufacturing outlook came in at 7 vs. 8 expected and 8 in Q4. Lastly, large all industry capex came in at 2.2% vs. 4.4% expected and 9.3% in Q4. While many of the readings came in better than expected, the generally softer tone in the economy remains intact. This is not surprising given the impact of omicron and while a rebound in Q2 is expected, it comes against a backdrop of generally slower global growth. Final March manufacturing PMI came in at 54.1 vs. 53.2 preliminary.

Michele Bullock was nominated as the Reserve Bank of Australia’s first female Deputy Governor. She replaces Guy Debelle, who left for the private sector. Bullock is well-respected and is now in line to eventually take over from Governor Philip Lowe. She was appointed to a five-year term starting immediately. Bullock moves over from being Assistant Governor for the financial system. Before that, she was Assistant Governor for currency and business services from 2010-2016 and so she comes with a wealth of experience. As such, there are no policy implications to her appointment. WIRP still suggests liftoff June 7 is fully priced in. Looking ahead, swaps market is pricing in 225 bp of tightening over the next 12 months with another 100 bp over the following 12 months that would take the policy rate up near 3.5%. This is incredibly aggressive. RBA meets next Tuesday and its forward guidance will be key in validating or pushing back against market expectations.

Caixin reported soft China manufacturing PMI. Headline came in at 48.1 vs. 49.9 expected and 50.4 in February. This comes after official manufacturing PMI came in at 49.5 vs. 49.8 expected and 50.2 in February and non-manufacturing PMI came in at 48.4 vs. 50.3 expected and 51.6 in February. Caixin reports its services PMI next Wednesday and is expected at 49.8 vs. 50.2 in February. However, there are clear downside risks after the official readings. Given that the lockdowns have spread and intensified, we expect April readings to get even worse. The economy is clearly slowing from the latest pandemic wave and the growth target for this year of “around 5.5%” looks increasingly difficult to achieve. As a result, it’s clear that more stimulus measures will be seen soon, both fiscal and monetary. We believe central bank divergence and narrowing interest rate differentials will continue to weaken the yuan.

Korea reported March trade data. Exports came in at 18.2% y/y vs. 19.0% expected and 20.6% in February, while imports came in at 27.9% y/y vs. 27.5% expected and 25.2% in February. Also, March manufacturing PMI came in at 51.2 vs. 53.8 in February. The slowdown in the mainland China economy is already having an impact in the regional survey data and should soon show up in the real sector data as well. Exports should slow while imports are likely to remain robust due to high energy prices. Worsening external balances are at the margin negative for the won and other emerging Asian currencies, as is the general reluctance for the regional central banks to tighten. Bank of Korea is an exception and so the won may outperform within emerging Asia.

Brown Brothers Harriman & Co. (“BBH”) may be used as a generic term to reference the company as a whole and/or its various subsidiaries generally. This material and any products or services may be issued or provided in multiple jurisdictions by duly authorized and regulated subsidiaries.This material is for general information and reference purposes only and does not constitute legal, tax or investment advice and is not intended as an offer to sell, or a solicitation to buy securities, services or investment products. Any reference to tax matters is not intended to be used, and may not be used, for purposes of avoiding penalties under the U.S. Internal Revenue Code, or other applicable tax regimes, or for promotion, marketing or recommendation to third parties. All information has been obtained from sources believed to be reliable, but accuracy is not guaranteed, and reliance should not be placed on the information presented. This material may not be reproduced, copied or transmitted, or any of the content disclosed to third parties, without the permission of BBH. All trademarks and service marks included are the property of BBH or their respective owners.© Brown Brothers Harriman & Co. 2022. All rights reserved.

As of June 15, 2022 Internet Explorer 11 is not supported by

Important Information for Non-U.S. Residents

You are required to read the following important information, which, in conjunction with the Terms and Conditions, governs your use of this website. Your use of this website and its contents constitute your acceptance of this information and those Terms and Conditions. If you do not agree with this information and the Terms and Conditions, you should immediately cease use of this website. The contents of this website have not been prepared for the benefit of investors outside of the United States. This website is not intended as a solicitation of the purchase or sale of any security or other financial instrument or any investment management services for any investor who resides in a jurisdiction other than the United States1. As a general matter, Brown Brothers Harriman & Co. and its subsidiaries (“BBH”) is not licensed or registered to solicit prospective investors and offer investment advisory services in jurisdictions outside of the United States. The information on this website is not intended to be distributed to, directed at or used by any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation. Persons in respect of whom such prohibitions apply must not access the website.  Under certain circumstances, BBH may provide services to investors located outside of the United States in accordance with applicable law. The conditions under which such services may be provided will be analyzed on a case-by-case basis by BBH. BBH will only accept investors from such jurisdictions or countries where it has made a determination that such an arrangement or relationship is permissible under the laws of that jurisdiction or country. The existence of this website is not intended to be a substitute for the type of analysis described above and is not intended as a solicitation of or recommendation to any prospective investor, including those located outside of the United States. Certain BBH products or services may not be available in certain jurisdictions. By choosing to access this website from any location other than the United States, you accept full responsibility for compliance with all local laws. The website contains content that has been obtained from sources that BBH believes to be reliable as of the date presented; however, BBH cannot guarantee the accuracy of such content, assure its completeness, or warrant that such information will not be changed. The content contained herein is current as of the date of issuance and is subject to change without notice. The website’s content does not constitute investment advice and should not be used as the basis for any investment decision. There is no guarantee that any investment objectives, expectations, targets described in this website or the  performance or profitability of any investment will be achieved. You understand that investing in securities and other financial instruments involves risks that may affect the value of the securities and may result in losses, including the potential loss of the principal invested, and you assume and are able to bear all such risks.  In no event shall BBH or any other affiliated party be liable for any direct, incidental, special, consequential, indirect, lost profits, loss of business or data, or punitive damages arising out of your use of this website. By clicking accept, you confirm that you accept  to the above Important Information along with Terms and Conditions.

1BBH sponsors UCITS Funds registered in Luxembourg, in certain jurisdictions. For information on those funds, please see

captcha image

Type in the word seen on the picture

I am a current investor in another jurisdiction