Pessimistic sentiment is deeply rooted; why strong non-farm payroll data also struggles to reverse the dollar's decline

The market has once again defied traditional expectations with concrete actions — even as U.S. employment data remains strong, the dollar has failed to halt its decline. Behind this seemingly contradictory phenomenon lies a deeply rooted market consensus: the trend of dollar depreciation is already in place.

Market Sentiment Remains Clouded, Fundamentals Fail to Support

According to Jin10, Corpay strategist Carl Shamota pointed out that despite signals of resilience in the U.S. labor market, suggesting the Federal Reserve may continue to hold a wait-and-see stance, these positive economic fundamentals have been unable to reverse the overall weakness of the dollar. This indicates that bearish sentiment towards the dollar has become ingrained in market participants’ minds, and even supportive employment data signals are unlikely to change this outlook.

Bearish Consensus Firm, Expectations Face Challenges

For investors and analysts who once hoped that strong U.S. economic fundamentals could support the dollar, this serves as a significant warning. It shows that the market’s bearish consensus has taken hold, and positive economic data alone is no longer sufficient to alter the overall market sentiment and expectations.

Mild Decline in Historical Context and Future Risks

From a historical perspective, the current decline of the dollar remains relatively moderate. However, if market pessimism does not undergo a substantial shift, the dollar could face further downside potential. This means that changing the deeply ingrained bearish atmosphere in the market will be key to a potential rebound of the dollar.