Goldman Sachs warns: Non-farm payroll data may trigger a new round of weakness for the US dollar, with the euro and yen expected to benefit
Goldman Sachs' analysis team warns that if the U.S. non-farm payroll data for June weakens more than expected, it will directly affect the exchange rate of the U.S. dollar against the euro and the yen, potentially triggering a new round of depreciation for the dollar. The market's expectations for the Federal Reserve to shift to a loose monetary policy will intensify, diminishing the dollar's safe-haven attributes and leading to a decline in short-term Treasury yields. Even if the data is not extremely weak, the dollar may still experience a moderate depreciation, benefiting emerging market assets, especially the renminbi exchange rate. Goldman Sachs believes that the June employment report will be a key test for the dollar's trend
According to the latest research report from Goldman Sachs, the upcoming U.S. June employment report may become a key turning point for the dollar's trend. If the data shows that the labor market continues to weaken, it may further strengthen market expectations for the Federal Reserve to shift to a loose monetary policy, thereby putting downward pressure on the dollar.
The current foreign exchange market is undergoing significant changes: as geopolitical tensions in the Middle East have notably eased, and domestic fiscal policy disputes in the U.S. (such as the controversy over Regulation 899 and tariff battles) have temporarily taken a backseat, traditional macroeconomic data has once again become the dominant factor driving exchange rate fluctuations.
It is worth noting that although the interest rate differential between the U.S. and Europe remains at historically high levels, the recent dollar index has shown a downward trend, reflecting a structural change in global capital flows. The cooling of market risk aversion has directly led to downward pressure on U.S. short-term Treasury yields, further weakening the dollar's safe-haven currency attributes.
Goldman Sachs' analysis team particularly emphasizes that if non-farm employment data shows a significant unexpected decline, it will directly impact the dollar's exchange rates against the euro and the yen, as it most accurately reflects the reality of slowing U.S. economic growth. Such data performance will not only intensify market bets on Federal Reserve rate cuts but may also trigger a new wave of dollar sell-offs.
From a broader macro perspective, even if the June employment data does not show extreme weakness, a gradual weakening of the dollar index remains highly probable. This mild depreciation trend will benefit emerging market assets, especially as the renminbi exchange rate is expected to gain support, with spillover effects likely impacting the entire Asian currency system.
Goldman Sachs ultimately concludes that the June employment report has essentially become a "stress test" for assessing the dollar's trend. If the data unexpectedly falls significantly below expectations, the dollar may face concentrated selling; if the data meets expectations, the market will continue the trading theme of "mild dollar depreciation + benefits for risk assets." This new narrative in the foreign exchange market, driven by traditional economic data, is replacing the previous volatility logic dominated by geopolitical and fiscal policy factors
