Traders have returned after the Thanksgiving holiday to an action-packed week topped off with the final NFP report of the year.
Markets expect the NFP report on Friday to show that the US economy added in November 200K jobs while the unemployment rate remained at 3.7%. In addition, average hourly earnings should pull up to 4.6%.
Analysts say we could see higher unemployment rates in the coming months due to big layoffs from tech giants. Twitter, Tesla, Shopify, Microsoft, Amazon, Meta and Netflix have all cut staff due to uncertain economic outlooks and lower profits.
Labour market cooling is undoubtedly good news for risky assets here, so a weak print and the Nasdaq and gold fire up, with good sellers in the USD.
Investors are also busy with inflation in the US and elsewhere to adjust their portfolios accordingly. Additionally, markets will tune in to heads of central banks’ speeches, such as the Fed and the ECB, to get some hints about the potential monetary policy in the next year.
What is the NFP report? How does it affect the USD?
The Nonfarm payroll (NFP) is a monthly report that estimates the net number of jobs gained in the US in the previous month.
It forms part of the Employment Situation report, including the US unemployment rate, average hourly earnings, and participation rate.
NFP report excludes the farming industry, private household employees, and non-profit organisations employees. It forms part of a comprehensive report on the labour market state. Increases in employment mean businesses are hiring and have money to spend on goods and services. Therefore, they further fuel growth.
Also, interest rates may increase if the economy is adding jobs at a healthy pace.
NFP releases generally tend to cause significant movements in the forex market. As is usually the case with these types of announcements, expect volatility in the financial markets around the time of the release. The financial assets most affected by the nonfarm payroll (NFP) data include the US dollar, equities and gold.
There are two ways to trade NFP; before or after the release.
If you place a trade before the figure publication, you may speculate how the market will go before it does.
Trading after the release is a little more cautious but comes with its own risks. Experts have noted that markets can mimic a V-shape post-NFP. In this V-shape reversal, the spike goes in one direction and reverses in minutes or hours.
The Nonfarm Payroll Report is usually due on Friday after the conclusion of the reference month.
The non-farm payrolls report (NFP) is a monthly significant market event.
For more market events, watch our Economic Calendar.
Did you spot your trading opportunity?
START TRADING