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All eyes on NFP – What can we expect?

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As the Fed, the USD and the rest of the market are sitting tight in anticipation of today’s Non-Farm Payroll (NFP) results, an indication of whether US growth has picked up will come to light.

After the last few results coming in weak and short of expectations, the question on everyone’s mind is, will the NFP figures meet, exceed or fall below forecasts?

Historically, the NFP has been the most important data for economic numbers not only for the US economy and its currency but also for global markets as a whole.

The NFP report tends to move all markets: currencies, equities, treasuries, interest rates and commodities.

The world’s largest economy has been gaining roughly 200,000 jobs on average in the past few years. While many things came and went, including growth, inflation, and interest rates, the average job growth has remained stable.

The US Fed keeps close attention to unemployment figures, and the labour market is also a large part of the Fed’s monetary policy decision. 

There is a knock-on effect on the state of the labour market. If it is deemed as healthy and growing, consumer confidence increases, meaning increased stability in consumer spending, and a healthier overall economy. 

So what can we expect?

September’s Non-Farm Payrolls report is certainly followed closely and may trigger more volatility than normal. 

Market participants are expecting the US NFP to be at 140,000.

A higher-than-anticipated NFP result usually leads to at least a short-term rise in the USD, while a lower than anticipated result usually leads to a fall in the price of the dollar.

The unemployment rate has remained steady at 3.7%, with the market looking to gain around 140,000 jobs. 

This month, the number is carrying more significance than usual following Tuesday’s 10-year low reading for the ISM Manufacturing PMI, which sent equity markets into a tailspin. Economic conditions are very weak due to this dismal data. It also fell further deep into the contraction territory with a reading of 47.8. Contraction and expansion are separated by a reading of 50.

Overall, there are growing fears that American hiring is slowing down, so a weak NFP will just add to market concerns of a slowdown in the US economy, putting further pressure on equity markets and the USD. 

However, any strength in the data should help to alleviate those fears and turn risk sentiment positive once more.

The many components of the Non-Farm employment change include the average hourly number, unemployment rate, the ISM manufacturing and non-manufacturing, and the ADP non-farm employment change.

The latest data for Non-Farm employment change came in at 130K against the forecast of 163K, while the previous number was 159K. But, the previous month’s data did confirm improvement in the average hourly earnings. The ADP Non-Farm employment change at 250K also held strong, and the Non-Farm productivity q/q also improved further.

How will President Trump react?

No doubt the US President will have something immediate to say.

If the data is weak, expectations are that he may publicly call on the Fed to further improve his economy by lowering interest rates.

While if numbers are weak, Tweets citing fudged figures and finger-pointing are likely to flood journalist feeds across the globe.

What about the Fed?

As per every month, Fed Chairman Jerome Powell will deliver his speech immediately after the results of the NFP. 

Speculators have increased their bets for another increase in rates for this year.

The Fed’s reaction is always closely watched, as it is their actions that can usually have the most significant impact on US monetary policy.

If the NFP falls short of the forecast and the numbers are weak, Chairman Powell will most likely deliver a dovish speech, and we can expect some hints for another rate cut. The markets will certainly be expecting some accommodative policy.

How can you be ready?

The results will be announced at 8:30am EST today.

The NFP tends to have an immediate short-term impact on the price of the USD and many other tradable assets, such as the GBP, euro, stocks and gold. 

Traders can position themselves to try and take advantage of market volatility after the NFP by being on “the right side” of the published data and will buy or sell affected assets based on where they think the NFP figures will fall.

If you’re trading with us, be sure to fund your account and place your trade ahead of the NFP volatility. New to TIOmarkets? Simply sign up and create your account to start trading with a low-cost broker today. 

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