How Will Today’s NFP Affect the USD?

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About the NFP

US Nonfarm Payrolls present the number of new jobs created during a given month, in all non-agricultural sectors of the US economy. The report does not include military and intelligence services, self-employed citizens and those employed on private households. The NFP is one of the most important US economic indicators, which is used in the evaluation of the country’s economic health as it represents about 80% of employees producing the entire GDP of the United States.

The release of this report usually increases volatility in foreign exchange markets. A higher than expected NFP reading can cause the USD pairs to rally, while a lower than expected NFP reading can cause the USD pairs to dip.

 

Here’s what happened last time

Last month Nonfarm payrolls in the US increased by 196 thousand for March of 2019, following an upwardly revised 33 thousand rise in February and beating market expectations of 180 thousand. Notable job gains were seen in health care and in professional and technical services. Employment growth averaged 180 thousand per month in the first quarter of 2019, compared with 223 thousand per month in 2018. March’s mixed NFP report caused the EUR/USD to fluctuate on the day.

 

So what can we expect this month?

Nonfarm payrolls are forecast to have risen by 180k in April, easing slightly from the prior month. The unemployment rate is expected to have stayed unchanged at 3.8%, while average hourly earnings are forecast to head back up to 3.4% y/y from 3.2% in March.

A weaker than expected reading will cause the dollar to dip and the Fed to reinforce its dovish stance. The greenback could come under great selling pressure if the NFP figures come anywhere below 150K. Alternatively, if we get a stronger than expected NFP, we would expect the USD to edge higher against its key rivals.

Meanwhile, market participants will also focus on US factory orders for March and the ISM non-manufacturing PMI for April on Friday, which will round up a data-packed week in the US.

 

Sources: Trading Economics Apr 30, 8:30 GMT

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