US Dollar: NFP and inflation mix complicate Fed path – BNY

Today Markets UAEAugust 4, 2026

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BNY strategists John Velis and David Tam highlight the July Nonfarm Payrolls (NFP) report and upcoming Consumer Price Index (CPI) releases as key inputs for the Fed. They see consensus around 80,000 jobs, with a breakeven near 50,000 to keep unemployment steady. A weaker print could lower 2-year yields and rate-hike expectations. They stress sticky inflation, supply shocks, AI-related capex and constrained labor supply as factors keeping US rates pricing unsettled.

Jobs, CPI and policy learning

“This week features the July Nonfarm Payrolls (NFP) report on Friday, and market expectations currently see around 80,000 new jobs. We don’t think the payrolls “breakeven rate” is much above 50,000 per month, if that. It currently doesn’t require large monthly employment gains to keep the unemployment rate steady, thanks to a much slower labor force growth than before the pandemic.”

“Inflation is sticky, but it’s also being whipped around by supply shocks. The AI build is raising questions about the capex outlook and its impact on jobs and productivity.”

“Labor supply is restrained, making inferences about the job market fraught, and the new Fed is still being revealed. All in all, a tricky mix of factors for the market to price, and it’s unlikely we’ve reached a steady state yet.”

“An additional NFP print and two more CPI releases follow Friday’s NFP report. Warsh’s speech at Jackson Hole at the end of the month is another key event, although given his short track record so far, we won’t be holding our breath for much specificity on rates.”

“The market – and economists – continue to learn about the Warsh Fed.”